How to manage mileage expenses from home to work
The basic rule when managing business mileage expenses is that only costs for business journeys - such as travel to meetings - should be reimbursed.
It seems so simple, but it’s not. The confusion lies in what is and isn’t a business-related journey - particularly if it involves commuting.
It can be confusing and lead to businesses losing money. How? They reimburse unnecessary travel costs and raise the risks of compliance breaches.
Here’s a look at the issue and how business owners can better manage their employees claiming mileage reimbursements.
Can employees claim business mileage from home to work?
The simple answer is no.
The general rule is that work-related journeys are those that take place only after an employee has started work. So travelling to a workplace is classed as a private journey, not a legitimate claim.
This is based on the guidance provided by the tax authorities. Following these guidelines simplifies the process of financial compliance. However, it is ultimately a choice for each employer to define their policy on business travel expenses (within the confines of the law).
What are the HMRC rules on commuting expenses?
The HMRC allows tax relief to be claimed on ‘business-related’ journeys that meet one of two criteria:
- An employee needs to make a trip in order to do their work
- Their work requires them to visit a location other than their normal workplace
This covers the vast majority of regular business trips. Whether it’s attending a meeting, picking up office supplies, or travelling between various company sites.
They also make it clear that, for tax purposes, any regular commute between a person’s home and their permanent workplace is classed as a ‘private’ journey.
HMRC’s definition of a ‘permanent workplace’ is: “A place at which an employee works is a permanent workplace if he or she attends it regularly for the performance of the duties of the employment. It is usually clear whether or not a place is an employee’s permanent workplace (and, therefore, whether a journey to that place is ordinary commuting).”
Travel to a temporary workplace may be allowed if:
- The person works there for less than 24 hours.
- They are at the location for less than 40% of their time.
What if an employee travels from home to a client or meeting?
For tax purposes, legitimate business mileage expenses are only those mileage costs that are more than a person's normal travel-to-work routine.
If they claim for a road journey from their home to a business conference that’s 16 miles away, their usual four-mile commuting distance can be deducted. This deduction is often referred to as “offset mileage.”
This offsetting method is commonly used by public sector organisations. It allows employees to be flexible while making sure employers are covering only the business-related part of an automobile journey.
Traditionally, finance teams have been slow to offset mileage due to the administrative complexity of the process. Users or admins would be required to calculate the distance by manually deducting these ‘private’ trips from mileage claims. Technology has made this process much easier - and faster.
How can technology help ‘offset mileage’ for expense reimbursement?
Digital expense management tools that include a mileage tracking app are making it much simpler to effectively offset mileage expenses.
How it works
- Finance teams can set individuals’ commutable mileage within their user profiles.
- Mileage claims that involve travel from the person’s home are automatically deducted from the commuting distance.
- Only the ‘business’ portion of the journey is reimbursed.
This saves businesses unnecessary costs by only paying out on commutable mileage allowance and increases compliance.
Learn more about the Webexpenses mileage tracking feature.