The current rules on travel and subsistence payments have remained largely unchanged since 1998. The first rule gives tax relief for travel undertaken in the performance of the duties of your employment. This is basically the cost of travel that is an intrinsic part of the employee’s job, for example journeys undertaken by a lorry driver, a travelling salesman, or a utility meter reader. This travel can also include journeys between two workplaces. This rule is generally well understood and applied correctly by employers in practice.
The second rule gives tax relief for necessary journeys to workplaces that an employee has to attend for work, apart from the cost of ordinary commuting. The rules define ordinary commuting as being journeys between an employee’s home, or somewhere else that is not a workplace, and a permanent workplace. Permanent workplace in turn is defined as being a workplace that the employee attends regularly and which is not a temporary workplace. It is this second category which the government wants to change. The government wishes to level the playing field as it believes that employment intermediaries are using these rules to get an economic advantage over those who are directly employed and claim tax relief for most of their travel because they do not have a permanent workplace - this puts those engaged through employment intermediaries at an advantage compared with employees.
The government commenced consultation in July 2015 and it has now extended this until 16 December 2015. The proposed new framework suggests that tax relief should only be available for travelling: (1) in the performance of employment duties; (2) to locations other than the 'main base', with scope for the employee to nominate a main base; and (3) to 'detached duty' locations (e.g. while on secondment). The government also favours removal of tax relief for day subsistence which currently allows tax relief on the cost or money you’ve spent on food or overnight expenses if you have to travel for your work.
Although workers (as opposed to employees) may on the face of it have preferential tax treatment in relation to travel, what is not being properly factored in is that those not directly employed do not have same employment rights, notably the holiday pay, redundancy protection or pension cover which those who are engaged directly have, which means the playing field is unequal at the outset. Arguably the tax benefits of the existing rules helped to attract the temporary high skilled workers who gave the UK economy the versatility to come out of the current recession.