18

Nov

Foreign Travel and Accommodation

Published by admin

General

  • A tax deduction for expenditure in connection with the employee’s travel will generally be available to the employee under the normal rules for temporary workplaces; and
  • The special rules detailed below address the tax treatment of foreign travelling costs for an employee and their spouse and family.

Summary

  • All travel costs will be deductible for the employee regardless of whether the assignment is carried out wholly or partly abroad;
  • There is no restriction on the number of trips an employee can make between the UK and the place of work abroad;
  • If an employee carries out duties which are performed wholly abroad the accommodation and subsistence costs will also be deductible. This will not be the case if the duties are carried out partly abroad;
  • The travel costs for an employee’s family will also be tax deductible but limited to two trips out and back per tax year; and
  • The accommodation and subsistence costs once abroad will not be deductible for an employee’s spouse and family. A potentially taxable benefit in kind will arise for the employee. A PAYE Settlement Agreement can be considered for any excess travel and accommodation expenditure.

Employee – duties performed wholly abroad

Initial and terminal journeys

If the following conditions are met and employee’s initial and terminal journeys will qualify for a tax deduction:

  • The duties of the employment are performed wholly outside the UK; and
  • The employee is resident and ordinarily resident in the UK.

Deduction

A deduction is available for journeys at the start and end of the assignment.  Care is needed to ensure that the journeys are not ‘tainted’ by travel to, for instance, a holiday location before the start of or at the end of the assignment.

Interim journeys to and from the UK

The following conditions must be met for a deduction and there is no limit on the number of journeys which qualify.

The employee must:

  • Be resident and ordinarily resident in the UK; and
  • The employee’s taxable earnings must include an amount in respect of:
    • the provision of travel facilities; or
    • the reimbursement of travel expenses incurred by the employee.

Conditions for this scenario (Case A in the legislation):

  • The employee is absent from the UK wholly and exclusively for the purpose of performing the duties; and
  • The duties concerned can only be performed outside the UK; and
  • The journey is:
    • a journey from a place outside the UK where such duties are performed to a place in the UK: or
    • a return journey following such a journey.

Deduction

  • A deduction is available for the cost incurred by the employer or reimbursed to the employee.

Employee – duties performed wholly abroad – accommodation and subsistence

The expenditure in connection with accommodation and subsistence is deductible if the following conditions are met:

  • The employee must:
    • perform the duties of an office or employment wholly outside the UK;
    • be resident and ordinarily resident in the UK;
    • The employee’s earnings include an amount in respect of:
      • the provision of accommodation or subsistence outside the UK for the employee for the purpose of enabling the employee to perform the duties of the employment, or
      • the reimbursement of expenses incurred by the employee on such accommodation or subsistence for that purpose.

Nature of the deduction

  • If the accommodation or subsistence is wholly for the purpose of enabling the employee to perform the duties of the employment, then the deduction will be equal to the amount included in earnings; and
  • If accommodation or subsistence is provided partly for another purpose, for example, private use for a holiday, the deduction is limited to the amount included in earnings that is properly attributable to the business purpose.

Employee – duties performed partly abroad

These journeys qualify for a deduction if the following conditions are met:

  • The employee must:
    • be resident and ordinarily resident in the UK; and
    • the employee’s taxable earnings must include an amount in respect of:
      • the provision of travel facilities for the employee by the employer; or
      • the reimbursement of expenses incurred by the employee.

Conditions for this scenario (Case B in the legislation):

  • The duties of the employment are performed partly outside the UK;
  • Those duties are not performed on a vessel;
  • The journey is between a place in the UK and a place outside the UK where the duties of the employment are performed;
  • The duties performed outside the UK can only be performed there; and
  • The journey is made wholly and exclusively for the purpose of performing them or returning after performing them.

Nature of the deduction

  • The deduction is equal to the amount included in taxable earnings;
  • Unlike the provisions for employees whose duties are wholly abroad, all the journeys for employees in these circumstances are subject to the same rules;
  • There is no limit to the number of journeys that can qualify; and
  • This provision does not allow a deduction for the cost of accommodation or subsistence at the place outside the United Kingdom where the employee performs the duties.

Duties performed wholly or partly abroad – travelling expenses of the family

To secure a deduction the following conditions must be met:

  • The employee must be resident and ordinarily resident in the UK;
  • The employee’s taxable earnings must include an amount in respect of:
    • the provision of travel facilities for a journey made by the employee’s spouse, civil partner or child; or
    • the reimbursement of expenses incurred by the employee on such a journey.
    • The employee is absent from the UK for a continuous period of at least 60 days for the purpose of performing the duties; and
    • The journey is between a place in the UK and a place outside the UK where such duties are performed.

The employee’s spouse, civil partner or child is:

  • Accompanying the employee at the beginning of the period of absence;
  • Visiting the employee during that period, or
  • Returning to the UK after so accompanying or visiting the employee.

Nature of the deduction

  • The deduction is equal to the amount included in the employee’s taxable earnings; and
  • The deduction is limited to:
    • two outward journeys from the UK to the overseas workplace;
    • two inward journeys from the overseas workplace to the UK; and
    • in any tax year by each member of the employee’s family.

Meaning of family

  • Family for this purpose includes:
    • the employee’s spouse;
    • the employee’s civil partner; and
    • the employee’s children. The term includes any stepchild, adopted child or illegitimate child but not a child over the age of 18 at the beginning of the outward journey.
  • The deduction only covers the travel costs of the family. Once the family arrives at the overseas workplace no deduction can be given for their accommodation or subsistence. If the employer meets the cost of the family’s accommodation or subsistence the cost will be taxable earnings of the employee.

Direct travel only

  • The travel should be to a place outside the UK where the employee performs the duties or lives. It cannot be to another place and then travel there. So for instance travel to New York, where the overseas duties are carried out, is deductible. This can then be followed by an onward trip to Miami which would not be covered. However, travelling direct to Miami would not be covered.

Deduction

  • The deduction available is limited to the amount included in earnings either as paid for by the employer or reimbursed to the employee; and
  • The deduction available is against general earnings taxable in accordance with the normal rules.

General

The travelling expenses covered are:

  • Fares; and
  • Subsistence expenditure while travelling.

Forms P11D and dispensations

  • The expenses incurred should be shown on form P11D unless covered by a dispensation; and
  • A dispensation can be put in place for the employee’s travel costs but not those of the family.

 

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