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24-month rule on temporary workplaces unchanged by COVID


Published: 18 Jun 2021 Update History

HMRC has reaffirmed that it is not changing its approach to tax relief on employees’ travel expenses to temporary workplaces in light of the impact of coronavirus pandemic.

Following queries from ICAEW’s Tax Faculty on the impact of the pandemic on employees’ ability to claim tax reliefs to temporary workplaces, HMRC has confirmed that its approach to the reliefs remains unchanged.

Under the 24-month rule employees spending at least 40% of their time at a temporary workplace for up to 24 months of “continuous work” are entitled to tax relief on their travel expenses. However, if it becomes apparent that the placement at the temporary workplace will go on for longer than 24 months then the employee is no longer entitled to any relief.

This means that employees working at a temporary workplace and then furloughed will no longer be entitled to claim tax reliefs on their remaining time at the temporary workplace if the furloughed time takes them over 24 months of “continuous work”.

To demonstrate the issue, the faculty uses the example of an employee who was due to work at a temporary workplace for 22 months, but three months in was placed on furlough for four months.

When they return to the temporary workplace for 19 months to complete the 22 months of work, they are no longer entitled to claim tax reliefs. This is because it was known that the initial three months of work, the four months of furlough and the 19 months of work would be together greater than 24 months.

When approached by ICAEW, HMRC confirmed that: “The government’s position remains that any period of furlough or working from home, whilst attending a temporary workplace, will be considered a period of continuous work.”

It argued that it would create “an unfair disparity” to treat furloughed employees differently in terms of the 24-month rule compared to other breaks in attendance beyond the employees’ control. “Therefore, we are upholding our decision not to make concessions by way of amended guidance or legislation.”

ICAEW has suggested to HMRC that a change to the application of the 24-month rule would be appropriate given the unprecedented situation, but there is no indication that this will be adopted.

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