// Get ready for April 2020

Free IR35 Software Demonstration

0345 548 3680


Home / Blog


HMRC plans to restrict tax relief for Temporary Workers commuting costs

9 January 15 | By: Jas Jhooty


The Government announced in the 2014 Autumn Statement that it was their intention to prevent employees of Overarching Contracts of Employment (OAC) or “umbrella companies” from obtaining tax relief for their home to work travel. To this end a consultation document has been published and responses are invited by 10th February 2015


It is common for employment businesses and umbrella companies to place temporary workers on multiple separate work placements on the terms and conditions of a single permanent employment. The employment business or umbrella company becomes the employer of the temporary worker. However, their premises are not the employees’ normal place of work, and they are not the organisation which directs the employee in their day to day tasks. This contractual arrangement enables individuals to access tax relief on travel costs and daily subsistence costs.

Generally tax and NICs relief is not available for the travel and subsistence expenses incurred by employees on travel between their home and their normal place of work. However an employee can get tax and NICs relief if the place they are travelling to is a temporary workplace.

By creating a single employment relationship spanning all of the engagements, OACs allow the employee to claim that each workplace is treated as a temporary workplace provided that the individual expects to be there for less than 24 months.

In some cases, unscrupulous employment intermediaries force the end worker to take these arrangements one step further and reimburse travel and subsistence expenses in return for a deduction in salary rather than reimbursing the expenses on top of the individual’s salary.

Allowing OAC temporary workers to obtain tax relief on their home to work travel is perceived as being unfair to directly employed workers and costs the Exchequer nearly £0.5 billion annually.


One option to address this unfairness would be to introduce legislation to amend the tax rules on travel and subsistence expenses. This legislation would mean that individuals engaged under an OAC by an employment intermediary to work for a third party, cannot claim tax relief for travel, and associated subsistence, from their home to the workplace of the end client.

One way to achieve this would be to determine that where the individual is supplied through a third party the workplace of the end client would in all cases be a permanent workplace In this case no relief for travel from home to workplace, and associated subsistence, would be available. This would apply whatever the form of the third party. This would not change the position of individuals who are directly employed by employers for short periods as they are currently treated as working at a “permanent workplace”.

An alternative option would be to restrict the availability of tax relief for travel from home to workplace, and associated subsistence costs, where the individual was employed by an intermediary specifically under an OAC. This could be accomplished by stopping OACs being treated for tax purposes as giving rise to a series of temporary “employments” under a permanent contract. This option would restrict access to existing rules for travel and subsistence to people employed under an OAC, rather than actually changing travel and subsistence rules, with the practical impact that the access of people employed under OACs to travel and subsistence is consistent with principle that the costs of ordinary commuting are not subject to tax relief.

How emTax can help

The Government are intending to rush through legislation to implement the proposed measures by April 2015. If you have any views on how these proposed new arrangements may affect your business please do not hesitate to contact us so that we may submit a response to HMRC on this consultation.

For any more advice on how these proposed new changes may affect your business, please do not hesitate to contact us.


Keep up to date

Enter your email to keep up to date with our latest employment tax news