A key factor in determining whether an employee may claim tax relief for the costs incurred in travelling to a workplace is whether it is a temporary or permanent workplace. HMRC’s guidance Ordinary commuting and private travel (490) includes examples which explain how the rules apply in the case of a non-executive director (examples seven to ten in chapter 3).

On 5 June 2024, ICAEW wrote to HMRC (Appendix 1) setting out the following example: An individual is employed by a VC and is based at the VC’s London office (it is their permanent workplace). The VC has acquired a new portfolio company. The individual is appointed as non-executive director of the portfolio company and incurs expenses in travelling to attend a board meeting. The individual’s travel costs are reimbursed by the VC. Neither the individual nor the VC receives director fees from the portfolio company.

ICAEW asked HMRC to confirm that, in the circumstances set out above, and also where the individual attends as an observer, the individual has a temporary workplace when attending directors’ meetings at the portfolio company.

In its response dated 18 June 2024 (Appendix 2), HMRC has confirmed that, in the scenario outlined in ICAEW’s letter, the individual would have a temporary workplace when observing/attending directors’ meetings at the portfolio company.

HMRC will consider including such an example as part of future updates to its guidance.

The relevant parts of the ICAEW and HMRC’s letters are reproduced in the appendices to this TAXguide.

[An extract from ICAEW’s letter to HMRC dated 5 June 2024 is reproduced below.]

We suggest that HMRC booklet 490 Tax & NIC for employee travel, in particular Chapter 3: Ordinary commuting and private travel, and the employment income manuals, in particular EIM32075 - Travel expenses: travel expenses for necessary attendance: definitions; temporary workplace and EIM32150 – Travel expenses: travel for necessary attendance: attendance for a temporary purpose, explain how the law applies to reimbursement of travelling expenses for non-executive directors of venture capital (VC) portfolio companies. The example of Dinesh in booklet 490 has changed over the years and we should welcome guidance covering the following circumstances:

• When a VC acquires a new portfolio company, they generally acquire a right to appoint a non-executive director and/or observer to the portfolio company board. This right is not always exercised in practice. Portfolio companies are not necessarily based in the UK.
• No management or director fees are passed from the portfolio company to the VC (i.e. so s.16B ITTOIA 2005 and associated provisions have not been considered).
• Observers do not have any voting rights and may generally be present at board meetings to shadow and report back to the VC / be a second pair of ears.
• Directors and observers are employees of the VC (in instances where the VC has exercised its right to appoint someone). They are unpaid (i.e. there are no separate director fees – they continue to be paid their normal VC salary).
• The employees of the VC are based at the VC’s London office and this is considered their permanent workplace for tax purposes.
• The VC reimburses the employee for travel and subsistence costs where the employee has had to attend a board meeting for a portfolio company (in either a director or observer capacity) such as in Bristol or elsewhere outside London.

Please would HMRC confirm that because the director appointed to the portfolio company is occupying that office as part of his employment with the VC and he has a permanent workplace at the VC’s London office, he has a temporary workplace when observing/ attending directors’ meetings at the portfolio company? This would seem to be in line with paragraph 3.16 – examples 7 to 10.

Could a similar example to the one above be added to the booklet 490 and in the EIM after page EIM32150 to add clarity on this point?

We look forward to hearing from you and we are very happy to discuss this further if required.

[An extract from HMRC’s response dated 18 June 2024 to ICAEW’s letter is reproduced below.]

Thank you for raising this with us. We will take this into consideration as part of future updates to the 490 booklet and relevant guidance.

HMRC can confirm that in the scenario you outlined in your letter, the director would have a temporary workplace when observing/attending directors’ meetings at the portfolio company.