One of your company’s directors has to make a round trip of nearly 300 miles to attend a board meeting. What’s the tax and NI position if the company pays for or reimburses the director for their travel expenses?

Travel expenses tax treatment

Payment or reimbursement of the directors’ travel expenses (including subsistence and accommodation costs) for attending a board meeting may or may not be taxable dependent on a number of variables. It’s even possible that payments to one director are taxable while to the others they aren’t.

Directorship equals employment

For tax purposes directors count as employees. This is largely true for NI purposes too. This means that a director’s travel expenses are exempt if either of the following conditions apply. The journey is:

  • made in the course of doing their job, e.g. a sales director whose role involves visiting customers etc.; or
  • for a temporary purpose required by their job, e.g. a director of a building firm visiting a site to carry out a survey.
  • Board meetings are part of a director’s job. The first condition for tax and NI exemption won’t apply but the second might. However, there’s a major hurdle to clear first.

Trap. If the travel is “ordinary commuting” the above rules don’t apply and therefore payment or reimbursement of travel expenses is taxable and liable to NI, usually as a benefit in kind.

What is ordinary commuting?

Ordinary commuting is travel between your home and your “permanent place of work”. In typical HMRC style it defines this as a place which is not a temporary workplace. That’s not very helpful, but to be fair it goes on to define a temporary workplace as “somewhere the employee goes only to perform a task of limited duration or for a temporary purpose.” So attending a place day-to-day to carry out the duties of your job makes it your permanent workplace. Thus a director who normally works at the head office will be commuting if they attend a board meeting there even if they make a special trip out of normal hours to attend. Therefore, if the company pays their travel costs it is a taxable benefit in kind.

Working from home

In our subscriber’s query two of the directors work from home, which means that is their permanent workplace. They rarely visit head office and only then for a temporary purpose, e.g. to attend a board meeting. The second of the conditions mentioned above therefore applies to those journeys and payment/reimbursement of the travel expenses is exempt.

Tip. Even if the head office was also a regular workplace for one of the homeworking directors, travel between their home and head office is tax and NI exempt.

A movable feast

To prevent the directors who work from home always having to travel for board meetings, our subscriber could arrange for some to be held near where they live, say at a nearby hotel. In that case the travel etc. expenses for the other directors could be paid tax and NI free because the second condition for the exemption would apply to them.

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