How do you calculate commuting expenses? - General - Flexible and hybrid working

4 How do you calculate commuting expenses?

3 Feb, 2023 13:13

Hi everyone.

Quite basic question here but trying to find guidance online appeared tricky.

We have an employee who lives outside London. At the time of offer he was promised that his commute to the company's London office will be reimbursed. This also appears in his employment contract although this is a hybrid, office and home based contract. It was never made specific what this reimbursement should cover and there is no relevant policy in place. Don't ask how all this was agreed. The company is young and until 3 months ago when I joined it was run by directors and minimal HR guidance.

The employee expects to claim mileage for the drive from his home to the train station, parking fee, train ticket to the office . Or, mileage from home to office and parking fee (for parking in central London!)

My opinion is that, he should either receive mileage (Full stop. No parking) or reimbursement of train ticket (Full stop again. No mileage and parking). Also, I would change his contract to Home Based to reduce tax implications.

Just to add that he also owns a company car fully paid by the company.

Is there any standard process/guidance on this and how would you calculate commuting in such a case?

Thank you in advance for your responses!

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Teresa | 0 Posts

3 Feb, 2023 16:34

I can only really comment on the tax issue and that is to say that in my experience, it doesn't matter what the contract says, HMRC go on what happens in practice. Therefore if he is regularly attending the office and you are reimbursing him for his expenses on that, you would need to deduct tax, or make a decision to pay it for him which will increase the cost. The risk of not doing so is a heft fee to HMRC further down the line.

Does the person who offered this still work there. If they do, I think they need to be the one that makes the decision - you can provide them with the options, costs and risks, but they need to make the decision and communicate it to the individual. It seems very much like a 'them' problem, rather than a HR one :)
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Sharon | 0 Posts

8 Feb, 2023 17:40

Wow, an interesting situation and I identify with it as I've been an interim in a start up and there can be a lot of fundamental, foundational pieces missing because directors just don't know the information and might not have asked. What a blind spot.

The company car is an interesting one so I'd bow to Teresa's post and also the HRMC info www.gov.uk/.../tax-on-company-cars and present the risks, costs and potential options.

I'd also suggest then having an expenses policy - light touch- so it's easy to know what can be claimed, why and how. You are probably on that one. Good luck.
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Eirini | 0 Posts

17 Feb, 2023 13:28

Thank you both for your responses. I understand that there is no standard practice to answer my question.
For the record, I discussed with the Director who worked on this offer. His view is that all expenses related to commuting should be reimbursed, and I am fine with that as long as he is aware how much money we are talking about.
I am also creating a policy to tie everything together and standardise the process.
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Teresa | 0 Posts

17 Feb, 2023 13:32

In reply to Eirini:
I think that this would be one that i would be inclined to follow up with an e-mail just to cover myself and so you have a record of their instruction. Did they clarify how they wanted to deal with the issue of tax? e.g. treat as pay and deduct, calculate the tax due and pay it for the individual, or not do anything and wait until HMRC do an inspection and give the organisation a fine and big bill?
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