Clarification on paying for, or refunding, transport costs for employees travelling from home to their workplace, due to coronavirus

25 March 2021

The guidance relating to the treatment of certain expenses and benefits provided to employees during coronavirus has been updated to clarify what happens where employers are paying or refunding their employees for transport costs.

Essentially, if any employer provides transport for its employees for travel between their workplace and home, and vice versa, due to coronavirus, then this would be classed as a benefit in kind. The stance is that journeys between an employee’s workplace and their home are considered as being private journeys.

Where an employer reimburses the cost of transport between an employee’s workplace and their home, then this is treated as earnings, and Pay As You Earn (PAYE) tax and Class 1 National Insurance (NI) must be deducted via payroll.

There are certain scenarios in which there will be no requirement to pay tax on this benefit. For this to apply, all of the following four conditions must be met:

  • The employee must be working later than usual, and until at least 9pm
  • This happens irregularly
  • By the time the employee finishes work, either:
    • Public transport has stopped running
    • It would not be reasonable to expect them to use public transport
  • The transport is by taxi, or similar road transport

Employees may frequently travel to work in a car with one or more other employees under a car-sharing agreement. If this arrangement stops due to unforeseen and exceptional circumstances, relating to coronavirus, and an employer provides transport or reimbursement of the expense of transport from the employee’s home to their workplace, then this may, too, be exempt. The total number of exempt journeys must not be more than 60 in a tax year, and this is a single limit that applies to the late-night journeys and also the failure of any car-sharing arrangement combined.

Where these requirements are not met, then free or subsidised transport will be classed as being taxable and should be reported via a PAYE Settlement Agreement (PSA) as a coronavirus-related benefit.

Paying travel and subsistence expenses for employees travelling to temporary workplaces

If an employee is placed on furlough, and is travelling to a temporary workplace, then the period of furlough forms part of that period of continuous work. A period of working from home will also be part of the period of continuous work.

It is important to note that the workplace ceases being temporary from the date that the attendance there is expected to exceed 24 months. Tax and NICs will then become due on any payments relating to travel and subsistence expenses.


The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our Coronavirus hub.