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Business Taxes

7 Rules You Should Know About Deducting Business Travel Expenses

What Is Your "Tax Home"?

Charges on Your Hotel Bill

The 50% rule for meals, the cost of bringing a spouse, friend or employee.

Using Per Diems To Calculate Employee Travel Costs

Combined Business/Personal Trips

International business travel.

The Cost of a Cruise (Within Limits)

Frequently Asked Questions (FAQs)

Helde Benser / Getty Images

The IRS has a specific definition for business travel when it comes to determining whether these expenses are tax deductible. The agency says business travel is travel that takes you away from your tax home and is "substantially longer than an ordinary day's work." It requires that you sleep or rest while you're away from home, and that you do so. The travel must be "temporary." This means it can't last a year or more.

Key Takeaways

You can deduct expenses that take you away from your tax home for a period of time that would require you to spend the night.
Your tax home is the city or area where your regular place of business is located.
You’re limited to 50% of the cost of your meals.
Your trip must be entirely business-related for costs to be deductible, but special rules apply if you travel outside the U.S.

What Is Your "Tax Home"?

Your tax home is a concept set by the IRS to help determine whether a trip is tax deductible. It's defined by the IRS as the entire city or general area where your regular place of business is located. It's not necessarily the area where you live.

Your tax home can be used to determine whether your business travel expenses are deductible after you've determined where it's located. You can probably count your expenses during travel as business deductions if you have to leave your tax home overnight or if you otherwise need time to rest and sleep while you're away.

Check with a tax professional to make sure you're accurately identifying the location of your tax home.

Charges for your room and associated tax are deductible, as are laundry expenses and charges for phone calls or for use of a fax machine. Tips are deductible as well. But additional personal charges, such as gym fees or fees for movies or games aren't deductible.

You can deduct the cost of meals while you're traveling, but entertainment expenses are no longer deductible and you can't deduct "lavish or extravagant" meals.

Meal costs are deductible at 50%. The 50% limit also applies to taxes and tips. You can use either your actual costs or a standard meal allowance to take a meal cost deduction, as long as it doesn't exceed the 50% limit.

The cost of bringing a spouse, child, or anyone else along on a business trip is considered a personal expense and isn't deductible. But you may be able to deduct travel expenses for the individual if:

The person is an employee
They have a bona fide business purpose for traveling with you
They would otherwise be allowed to deduct travel expenses

You may be able to deduct the cost of a companion's travel if you can prove that the other person is employed by the business and is performing substantial business-related tasks while on the trip. This may include taking minutes at meetings or meeting with business clients.

Using Per Diems To Calculate Employee Travel Costs

The term "per diem" means "per day." Per diems are amounts that are considered reasonable for daily meals and miscellaneous expenses while traveling.

Per diem rates are set for U.S. and overseas travel, and the rates differ depending on the area. They're higher in larger U.S. cities than for sections of the country outside larger metropolitan areas. Companies can set their own per diem rates, but most businesses use the rates set by the U.S. government.

Per diem reimbursements aren't taxable unless they're greater than the maximum rate set by the General Service Administration. The excess is taxable to the employee.

If you don't spend all your time on business activities during an international trip, you can only deduct the business portion of getting to and from the destination. You must allocate costs between business and personal activities.

Your trip must be entirely business-related for you to take deductions for travel costs if you remain in the U.S., but some "incidental" personal time is okay. It would be incidental to the main purpose of your trip if you travel to Dallas for business and you spend an evening with family in the area while you're there.

But attempting to turn a personal trip into a business trip won't work unless the trip is substantially for business purposes. The IRS indicates that “the scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip."

The rules are different if part or all of your trip takes you outside the U.S. Your international travel may be considered business-related if you were outside the U.S. for more than a week and less than 25% of the time was spent on personal activities.

You can deduct the costs of your entire trip if it takes you outside the U.S. and you spend the entire time on business activities, but you must have "substantial control" over the itinerary. An employee traveling with you wouldn't have control over the trip, but you would as the business owner would.

The trip may be considered entirely for business if you spend less than 25% of the time on personal activities if your trip takes you outside the U.S. for more than a week.

You can only deduct the business portion of getting to and from the destination if you don't spend all your time on business activities during an international trip. You must allocate costs between your business and personal activities.

The Cost of a Cruise (Within Limits)

The cost of a cruise may be deductible up to the specified limit determined by the IRS, which is $2,000 per year as of 2022. You must be able to show that the cruise was directly related to a business event, such as a business meeting or board of directors meeting.

The IRS imposes specific additional strict requirements for deducting cruise travel as a business expense.

How do you write off business travel expenses?

Business travel expenses are entered on Schedule C if you're self-employed . The schedule is filed along with your Form 1040 tax return. It lists all your business income, then you can subtract the cost of your business travel and other business deductions you qualify for to arrive at your taxable income.

What are standard business travel expenses?

Standard business travel expenses include lodging, food, transportation costs , shipping of baggage and/or work items, laundry and dry cleaning, communication costs, and tips. But numerous rules apply so check with a tax professional before you claim them.

The Bottom Line

These tax deduction regulations are complicated, and there are many qualifications and exceptions. Consult with your tax and legal professionals before taking actions that could affect your business.

IRS. " Topic No. 511: Business Travel Expenses ."

IRS. " Publication 463 (2021), Travel, Gift, and Car Expenses ."

IRS. " Here’s What Taxpayers Need To Know About Business-Related Travel Deductions ."

Everything You Need to Know About the Business Travel Tax Deduction

Justin is an IRS Enrolled Agent, allowing him to represent taxpayers before the IRS. He loves helping freelancers and small business owners save on taxes. He is also an attorney and works part-time with the Keeper Tax team.

You don’t have to fly first class and stay at a fancy hotel to claim travel expense tax deductions. Conferences, worksite visits, and even a change of scenery can (sometimes) qualify as business travel.

What counts as business travel?

The IRS does have a few simple guidelines for determining what counts as business travel. Your trip has to be:

Mostly business
An “ordinary and necessary” expense
Someplace far away from your “tax home”

What counts as "mostly business"?

The IRS will measure your time away in days. If you spend more days doing business activities than not, your trip is considered "mostly business". Your travel days are counted as work days.

Special rules for traveling abroad

If you are traveling abroad for business purposes, you trip counts as " entirely for business " as long as you spend less than 25% of your time on personal activities (like vacationing). Your travel days count as work days.

So say you you head off to Zurich for nine days. You've got a seven-day run of conference talks, client meetings, and the travel it takes to get you there. You then tack on two days skiing on the nearby slopes.

Good news: Your trip still counts as "entirely for business." That's because two out of nine days is less than 25%.

What is an “ordinary and necessary” expense?

“Ordinary and necessary” means that the trip:

Makes sense given your industry, and
Was taken for the purpose of carrying out business activities

If you have a choice between two conferences — one in your hometown, and one in London — the British one wouldn’t be an ordinary and necessary expense.

What is your tax home?

A taxpayer can deduct travel expenses anytime you are traveling away from home but depending on where you work the IRS definition of “home” can get complicated.

Your tax home is often — but not always — where you live with your family (what the IRS calls your "family home"). When it comes to defining it, there are two factors to consider:

What's your main place of business, and
How large is your tax home

What's your main place of business?

If your main place of business is somewhere other than your family home, your tax home will be the former — where you work, not where your family lives.

For example, say you:

Live with your family in Chicago, but
Work in Milwaukee during the week (where you stay in hotels and eat in restaurants)

Then your tax home is Milwaukee. That's your main place of business, even if you travel back to your family home every weekend.

How large is your tax home?

In most cases, your tax home is the entire city or general area where your main place of business is located.

The “entire city” is easy to define but “general area” gets a bit tricker. For example, if you live in a rural area, then your general area may span several counties during a regular work week.

Rules for business travel

Want to check if your trip is tax-deductible? Make sure it follows these rules set by the IRS.

1. Your trip should take you away from your home base

A good rule of thumb is 100 miles. That’s about a two hour drive, or any kind of plane ride. To be able to claim all the possible travel deductions, your trip should require you to sleep somewhere that isn’t your home.

2. You should be working regular hours

In general, that means eight hours a day of work-related activity.

It’s fine to take personal time in the evenings, and you can still take weekends off. But you can’t take a half-hour call from Disneyland and call it a business trip.

Here's an example. Let’s say you’re a real estate agent living in Chicago. You travel to an industry conference in Las Vegas. You go to the conference during the day, go out in the evenings, and then stay the weekend. That’s a business trip!

3. The trip should last less than a year

Once you’ve been somewhere for over a year, you’re essentially living there. However, traveling for six months at a time is fine!

For example, say you’re a freelancer on Upwork, living in Seattle. You go down to stay with your sister in San Diego for the winter to expand your client network, and you work regular hours while you’re there. That counts as business travel.

What about digital nomads?

With the rise of remote-first workplaces, many freelancers choose to take their work with them as they travel the globe. There are a couple of requirements these expats have to meet if they want to write off travel costs.

Requirement #1: A tax home

Digital nomads have to be able to claim a particular foreign city as a tax home if they want to write off any travel expenses. You don't have to be there all the time — but it should be your professional home base when you're abroad.

For example, say you've rent a room or a studio apartment in Prague for the year. You regularly call clients and finish projects from there. You still travel a lot, for both work and play. But Prague is your tax home, so you can write off travel expenses.

Requirement #2: Some work-related reason for traveling

As long as you've got a tax home and some work-related reason for traveling, these excursion count as business trips. Plausible reasons include meeting with local clients, or attending a local conference and then extending your stay.

However, if you’re a freelance software developer working from Thailand because you like the weather, that unfortunately doesn't count as business travel.

The travel expenses you can write off

As a rule of thumb, all travel-related expenses on a business trip are tax-deductible. You can also claim meals while traveling, but be careful with entertainment expenses (like going out for drinks!).

Here are some common travel-related write-offs you can take.

🛫 All transportation

Any transportation costs are a travel tax deduction. This includes traveling by airplane, train, bus, or car. Baggage fees are deductible, and so are Uber rides to and from the airport.

Just remember: if a client is comping your airfare, or if you booked your ticket with frequent flier miles, then it isn't deductible since your cost was $0.

If you rent a car to go on a business trip, that rental is tax-deductible. If you drive your own vehicle, you can either take actual costs or use the standard mileage deduction. There's more info on that in our guide to deducting car expenses .

Hotels, motels, Airbnb stays, sublets on Craigslist, even reimbursing a friend for crashing on their couch: all of these are tax-deductible lodging expenses.

🥡 Meals while traveling

If your trip has you staying overnight — or even crashing somewhere for a few hours before you can head back — you can write off food expenses. Grabbing a burger alone or a coffee at your airport terminal counts! Even groceries and takeout are tax-deductible.

One important thing to keep in mind: You can usually deduct 50% of your meal costs. For 2021 and 2022, meals you get at restaurants are 100% tax-deductible. Go to the grocery store, though, and you’re limited to the usual 50%.

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🌐 Wi-Fi and communications

Wi-Fi — on a plane or at your hotel — is completely deductible when you’re traveling for work. This also goes for other communication expenses, like hotspots and international calls.

If you need to ship things as part of your trip — think conference booth materials or extra clothes — those expenses are also tax-deductible.

👔 Dry cleaning

Need to look your best on the trip? You can write off related expenses, like laundry charges.

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Travel expenses you can't deduct

Some travel costs may seem like no-brainers, but they're not actually tax-deductible. Here are a couple of common ones to watch our for.

The cost of bringing your child or spouse

If you bring your child or spouse on a business trip, your travel expense deductions get a little trickier. In general, the cost of bring other people on a business trip is considered personal expense — which means it's not deductible.

You can only deduct travel expenses if your child or spouse:

Is an employee,
Has a bona fide business purpose for traveling with you, and
Would otherwise be allowed to deduct the travel expense on their own

Some hotel bill charges

Staying in a hotel may be required for travel purposes. That's why the room charge and taxes are deductible.

Some additional charges, though, won't qualify. Here are some examples of fees that aren't tax-deductible:

Gym or fitness center fees
Movie rental fees
Game rental fees

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Where to claim travel expenses when filing your taxes

If you are self-employed, you will claim all your income tax deduction on the Schedule C. This is part of the Form 1040 that self-employed people complete ever year.

What happens if your business deductions are disallowed?

If the IRS challenges your business deduction and they are disallowed, there are potential penalties. This can happen if:

The deduction was not legitimate and shouldn't have been claimed in the first place, or
The deduction was legitimate, but you don't have the documentation to support it

When does the penalty come into play?

The 20% penalty is not automatic. It only applies if it allowed you to pay substantially less taxes than you normally would. In most cases, the IRS considers “substantially less” to mean you paid at least 10% less.

In practice, you would only reach this 10% threshold if the IRS disqualified a significant number of your travel deductions.

How much is the penalty?

The penalty is normally 20% of the difference between what you should have paid and what you actually paid. You also have to make up the original difference.

In total, this means you will be paying 120% of your original tax obligation: your original obligation, plus 20% penalty.

Justin W. Jones, EA, JD

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Deductions For Business Travel Expenses

If you travel away from home overnight on business, you can deduct these travel expenses:

Airline, train, or bus fares — This includes first-class.
Actual expenses or standard mileage rate
Business-related tolls and parking

You might rent a car while you’re away from home on business. If you do, you can deduct only the business-use portion of the expenses. To learn more, see the Car and Truck Expenses tax tip.

To and from the airport or station
From one customer to another
From one place of business to another
Transportation from your temporary lodging to your temporary work assignment
Baggage charges and transportation costs for sample and display materials
Your own meal
Another person’s meal

To learn more, see the Meals and Entertainment tax tip.

Dry cleaning and laundry expenses
Phone, fax, and Internet expenses
Tips relating to deductible travel expenses
Other expenses, like public stenographer’s fees or computer rental fees

You can’t deduct expenses if they’re lavish or extravagant.

If your trip is mainly for business but includes some personal activities, you can deduct these expenses:

Travel expenses to and from the business destination
Food and lodging during the business portion of the stay

However, if the trip is mainly for personal reasons, you can’t deduct those expenses. This is true even if you conduct some business at the destination. You can deduct business expenses you incur at the destination, regardless of the purpose of the trip.

If you attend a convention that benefits or advances your business, you can also deduct appropriate expenses. These include:

Round-trip travel
Meals and lodging
Display costs

Travel outside the United States

You can deduct the cost of travel outside the United States if your entire trip is devoted to business activities. You could take a trip mainly for business, but engage in some personal activities there. If so, you have to prorate travel costs between your business and personal activities. Prorated costs include meals and lodging en route.

You can’t deduct expenses for travel as a form of education. Ex: If you’re a professor of Asian history, you can’t deduct the cost of a tour of Japan, even though the trip will enhance your lectures.

Special rules apply for conventions held outside the North American area and on cruise ships.

To learn more, see Publication 463: Travel, Entertainment, Gift, and Car Expenses at www.irs.gov.

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Credits and deductions
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Can I deduct travel expenses?

By turbotax • 578 • updated 10 months ago.

If you’re self-employed or own a business , you can deduct work-related travel expenses, including vehicles, airfare, lodging, and meals. The expenses must be ordinary and necessary.

For vehicle expenses, you can choose between the standard mileage rate or the actual cost method where you track what you paid for gas and maintenance.

You can generally only claim 50% of the cost of your meals while on business-related travel away from your tax home, provided your trip requires an overnight stay. You can also deduct 50% of the cost of meals for entertaining clients (regardless of location), but due to the Tax Cuts and Jobs Act of 2017 (TCJA), you can no longer deduct entertainment expenses in tax years 2018 through 2025. In 2021 and 2022, the law allows a deduction for 100% of your cost of food and beverages that are provided by a restaurant, instead of the usual 50% deduction.

On the other hand, employees can no longer deduct out-of-pocket travel costs in tax years 2018 through 2025 per the TCJA (this does not apply to Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses). Prior to the tax rule change, employees could claim 50% of the cost of unreimbursed meals while on business-related travel away from their tax home if the trip required an overnight stay, as well as other unreimbursed job-related travel costs. These expenses were handled as a 2% miscellaneous itemized deduction.

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HM Revenue & Customs

Travel and subsistence expenses for workers engaged through 'employment intermediaries' from 6 April 2016

Published 27 April 2016

This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected] .

Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.

This publication is available at https://www.gov.uk/government/publications/employment-intermediaries-travel-expense-guidance/travel-and-subsistence-expenses-for-workers-engaged-through-employment-intermediaries-from-6-april-2016

How the rules apply from 6 April 2016

From 6 April 2016, where a worker is supplying personal services through an employment intermediary, in the majority of cases the intermediary will need to consider what the worker’s employment status would be if they were contracted directly with the engager. Where the worker is an office-holder of the client, or would properly be considered an employee or office-holder if engaged directly by the client, the new legislation applies. In this case each engagement they undertake will be a separate employment for the purposes of obtaining relief for travel and subsistence expenses.

In these circumstances, it won’t currently be necessary to consider the supervision, direction or control ( SDC ) test. This also applies when a worker is supplying their personal services via their own personal service company ( PSC ), unless that service company is a managed service company ( MSC ) when the SDC test will need to be considered. The definition of an MSC has been amended for these legislative changes.

Where a worker’s circumstances are such that they would be properly considered as self-employed if engaged directly, the new legislation won’t apply.

Amendments to the legislation

The legislation will be amended at the earliest opportunity to reflect the announcement at Autumn Statement 2015 about when SDC needs to be considered.

Workers who are engaged through an employment intermediary (such as an umbrella company or an employment business) will then need to consider whether they are under the SDC (or right thereof) of any person, in the manner they undertake their work. Where a worker is under SDC , each engagement they undertake will be a separate employment for the purposes of obtaining relief for travel and subsistence expenses.

For practical purposes, HM Revenue and Customs ( HMRC ) doesn’t consider that an amendment to the existing legislation will affect the ultimate effect for the vast majority of workers currently engaged through employment intermediaries, including umbrella companies. Those who are working under SDC will, in most instances, be working in circumstances similar to those who are employees.

ESM5510 - introduction: the employment intermediaries travel expense provisions

Income Tax (Earnings and Pensions) Act 2003 ( ITEPA ), Part 5, Chapter 2, sections 337 to 342 Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraphs 3, 3ZA & 3ZB Introduction

Sections 337 to 342 of Income Tax (Earnings and Pension) Act 2003 ( ITEPA ) prescribe when employees can obtain tax relief for travel expenses. For this purpose, ‘travel expenses’ include the actual costs of travel together with any subsistence expenditure and other associated costs that are incurred in making the journey - EIM31815 . When these expenses are reimbursed there’s a corresponding National Insurance contributions ( NICs ) disregard.

From 6 April 2016 there are new provisions which change the treatment of travel and subsistence expenses for workers providing their personal services to clients through employment intermediaries. When these new provisions apply, each engagement the worker undertakes will be regarded as a separate employment for the purposes of travel and subsistence and therefore the worker’s travel and subsistence will be treated as if they were directly employed by the engager. This will mean that generally no relief will be given for home-to-work travel costs and associated subsistence. However, in certain circumstances, the new provisions are modified or disapplied.

In this section of the Employment Status manual these new provisions will be referred to as the employment intermediaries travel expense provisions. The tax provisions are subject to Parliamentary approval.

Ordinary commuting and permanent workplaces

The travel expense rules in sections 337 to 342 of ITEPA (including the definitions of ‘ordinary commuting’ and ‘permanent workplace’) set out where tax relief can be applied. In general, tax relief is available for travel and subsistence expenses which workers are obliged to incur and pay for:

travel in the performance of their duties, or
travel to or from a place they necessarily attend in the performance of their duties (excluding ordinary commuting), or
travel between a worker’s home and a ‘temporary’ workplace

Where a worker’s expenses are reimbursed, there’s a corresponding disregard for NICs purposes.

This relief is available provided the journey isn’t ordinary commuting or private travel. No relief is available for ordinary commuting, which is travel between home (or a place that is not a workplace) and a ‘permanent workplace’.

There are a number of criteria for determining if a workplace is temporary or permanent, but in general a workplace will always be a permanent workplace if the worker:

goes to the same workplace in the course of a period of continuous work which lasts or is likely to last more than 24 months, or
goes to the same workplace for all or almost all of the time for which the worker is likely to hold (or continues to hold) the same employment - EIM32125

Who the changes affect

The changes affect workers personally providing services to clients through an ‘employment intermediary’ ESM5550 which could be:

a recruitment or employment business
an umbrella company

When the employment intermediaries travel expense provisions apply, workers engaged through an ‘employment intermediary’ can’t claim tax relief or a disregard for NICs on the travel and subsistence expenses, such as the cost of lunch or dinner or overnight accommodation, they incur on an ordinary commute from home to work. The employment intermediaries’ expense provisions apply regardless of how workers are remunerated.

The changes

From 6 April 2016, section 339A has been introduced into ITEPA . This sets out new tax provisions for the treatment of travel and subsistence expenses for workers who personally provide services through ‘employment intermediaries’. Changes have also been made to the NICs disregard so that it mirrors the tax position where payments of, or contributions towards, such expenses are made.

There is a modification ESM5580 for workers engaged via intermediaries within the scope of the intermediaries legislation, known as IR35 ( ITEPA , Part 2, Chapter 8 and the Social Security Contributions (Intermediaries) Regulations 2000). This modification applies regardless of whether or not the worker takes remuneration from the intermediary as employment income. However this modification doesn’t apply in any circumstances to companies which are MSCs , or would be MSCs but for the fact that the worker takes all their income as employment income.

Further information

The effect of the employment intermediaries travel expense provisions - ESM5520 .

The application of the employment intermediaries travel expense rules, including exceptions and modification - ESM5530 onwards.

Further information on the treatment of travel and subsistence expenses:

tax - Employment Income manual EIM31800
National Insurance contributions - National Insurance manual NIM06250

The position for workers engaged through employment intermediaries before 6 April 2016 - ESM5680 .

ESM5520 - effect of the employment intermediaries travel expense provisions and definitions

Income Tax (Earnings and Pensions) Act 2003 ( ITEPA ), Part 5, Chapter 2, sections 337 to 339A Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraphs 3, 3ZA & 3ZB

From 6 April 2016, when the employment intermediaries travel expense provisions apply, where a worker personally provides services through an employment intermediary each engagement undertaken will be considered a separate employment for the purposes of travel and subsistence.

The travel and subsistence expense rules will apply in the same way as they would if the worker was engaged directly. It’s therefore likely that each workplace a worker attends will fall within the definition of a permanent workplace and travel to that workplace, from home (or a place that is not a workplace) would be considered ordinary commuting for the purposes of section 338 of ITEPA . Any payment for the cost of this travel would therefore be subject to tax. In addition, the NICs disregard for travelling expenses at paragraphs 3, 3ZA and 3ZB of Part 8 of Schedule 3 to the Social Security (Contributions) Regulations 2001 won’t apply.

For tax - there’s no tax relief on travel and subsistence expenses for ordinary commuting which is travel between home (or a place that is not a workplace) and a permanent workplace.

For NICs - the NICs treatment of travel and subsistence expenses mirrors the tax position, so that there’s no NICs disregard for any reimbursed expenses in respect of travel and subsistence incurred on journeys from home to a permanent workplace.

Definitions

In the context of the employment intermediaries travel expense provisions:

Arrangements - includes any scheme, transaction or series of transactions, agreement or understanding, whether or not enforceable, and any associated operations.

Employment intermediary - means a person, other than the worker or the client, who carries on a business (whether or not with a view to profit and whether or not in conjunction with any other business) of supplying labour.

Engagement - means any such provision of service as is mentioned in ITEPA , section 339A(1)(a) (ie where an individual (the worker) personally provides services (which are not excluded services) to another person (the client)).

Excluded services - means services provided wholly in the client’s home.

Managed service company - means a company which is an MSC within the meaning given by section 61B ITEPA , or would be such a company disregarding subsection (1)(c) of that section.

Guidance on when the employment intermediaries travel expense provisions apply - ESM5530 onwards.

Employment intermediaries within the scope of the MSC legislation - ESM5570 .

Modification relating to employment intermediaries within the scope of the Intermediaries legislation (known as IR35) - ESM5580 .

ESM5530 - application of the employment intermediaries travel expense provisions: the basic conditions

From 6 April 2016, the employment intermediaries travel expense provisions apply when a worker:

personally provides services to another person (the client) which are not excluded services ESM5540 , and
the services are provided, not under a contract directly between the client and the worker, but under arrangements involving an ‘employment intermediary’ ESM5550

Subject to the exception and the modification below, when both the conditions above apply the services the worker provides at each engagement will be treated as a separate employment for the purposes of the travel expenses rules in both of the following:

sections 338, 339 and 339A of ITEPA , and
the corresponding NICs disregard in the Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraphs 3, 3ZA and 3ZB

In effect, this means that when applying the travel expenses rules, a worker engaged through an employment intermediary will be treated in the same way as they would be if they were engaged directly.

Ordinary commuting

The rules for ordinary commuting in section 338 of ITEPA haven’t changed. A worker can’t claim tax relief on the cost of ordinary commuting (in general, home-to-work travel and subsistence expenses). Neither can a secondary contributor disregard from earnings any payments of, or contributions towards, expenses incurred in ordinary commuting. A journey that is essentially the same as ordinary commuting will be treated in the same way as any other ordinary commuting journey, so that:

a worker employed through an employment intermediary ESM5550 can’t turn an ordinary commuting journey into a business journey simply by arranging a business appointment along the way
an engager can’t turn an ordinary commuting journey into a business journey by requiring the worker to stop off on the way to carry out a business task, such as making a telephone call

There is an exception to the general provisions above, where the manner in which the worker personally provides their services isn’t subject to (or to the right of) SDC of any person ESM5560 . If that’s the case, then the employment intermediaries travel expense provisions don’t apply.

Modification

There’s a modification ESM5580 for workers providing their personal services through employment intermediaries which are required to consider the intermediaries’ legislation known as IR35 ESM3000 . This applies whether or not the intermediary is subject to IR35 legislation. HMRC considers that this modification can apply when a worker provides their personal services via a PSC and currently in circumstances involving other intermediaries, such as an umbrella company.

However, this modification doesn’t apply in any circumstances if the employment intermediary is an MSC within the meaning of section 61B ITEPA ESM3500 or would be an MSC if ITEPA , section 61B(1)(c) was disregarded ESM5570 . In these cases the test to be considered is whether the manner in which the worker personally provides their services is not subject to (or to the right of) SDC of any person ESM5560 .

ESM5540 - the basic conditions: personally provides services

For the employment intermediaries travel expense provisions to apply, 2 basic conditions ESM5530 must both be met. The first of the basic conditions is that an individual ‘the worker’ ‘personally provides services (which are not excluded services) to another person (the client)’ (section 339A (1)(a) ITEPA ).

In this context, a worker is personally providing services when they are doing work for the client.

Excluded services

This basic condition of personally providing services isn’t met if the worker’s services are provided wholly in the client’s own home.

Example - excluded services

Paul works away from home during the week only returning at weekends. As he is away so much he decides to get help with his domestic chores. During the summer he engages a gardener, George.

George works via his own PSC which is subject to IR35. Despite this George isn’t covered by the new legislation as he’s providing his services in Paul’s own home.

ESM5550 - the basic conditions: type of employment intermediary

For the employment intermediaries travel expense provisions to apply 2 basic conditions ESM5530 must both be met. The second of these basic conditions is that:

‘the services are provided, not under a contract directly between the client or a person connected with the client and the worker but under arrangements involving an employment intermediary’ (section 339A (1)(b) ITEPA )

Type of employment intermediary

An employment intermediary is an entity which sits between a worker and client as part of the arrangements under which the worker personally provides services to the client. In these circumstances the worker isn’t working under a direct contract between themselves and the client (or a person connected with the client) but is working under arrangements involving the employment intermediary.

For the employment intermediaries travel expense provisions to apply the employment intermediary must be a person, other than the worker or the client (or a person connected with the client), who carries on a business (whether or not with a view to profit and whether or not in conjunction with any other business) of supplying labour.

This will include employment intermediaries which are:

a company (including a limited company, a PSC , an MSC or an unincorporated company)
a partnership
an employment or recruitment business
an individual

Employment intermediaries within the scope of the intermediaries (IR35) legislation

The employment intermediaries travel expense provisions are modified ESM5580 when a worker personally provides their service through an intermediary which needs to consider and may be subject to the intermediaries legislation known as IR35 ESM3000 . This is regardless of whether IR35 does or doesn’t apply. HMRC considers that this modification can apply when a worker provides their personal services via a PSC and currently in circumstances involving other intermediaries, such as an umbrella company.

The modification doesn’t apply to companies which are MSCs or would be if the only reason why they are not is because the worker gets all their income by way of employment income - ESM5570 .

For the modifications relating to employment intermediaries within the scope of the intermediaries’ legislation (IR35) - ESM5580 .

Businesses that don’t fall into the definition of an ‘employment intermediary’

The employment intermediaries travel expense provisions don’t apply when an intermediary business doesn’t fall within the definition of an ‘employment intermediary’.

ESM5560 - supervision, direction or control

Income Tax (Earnings and Pensions) Act 2003 ( ITEPA ), Part 5, Chapter 2, sections 337 to 339A and Chapter 3, Part 11, section 688B Income Tax (Pay As You Earn) Regulations 2003, Part 4, Chapter 3B Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraphs 3, 3ZA & 3ZB

For the employment intermediaries travel expense provisions to apply both the basic conditions must be met ESM5530 . However, even where those conditions are met, the employment intermediaries travel expense provisions don’t apply if it can be shown that the manner in which the worker provides the services isn’t subject to (or to the right of) SDC by any person. Currently this test only applies to MSCs .

The basic assumption is that, unless it is shown otherwise, all workers are under SDC in the manner in which they provide their services (in general this is how an individual carries out the duties of their role).

SDC doesn’t have to be actually exercised in practice. The test is also met if a person has the right to supervise, direct or control the worker.

Determining if SDC applies

The worker can be subject to (or to the right of) SDC by anyone including:

the client or its subsidiary
an employment business, agency or other employment intermediary
independent consultants, site managers and project managers

Where there are procedures, methods and instructions which must be followed (written, verbal or implied), then it is likely there will be SDC over the manner in which the services are provided.

However, simply being required to comply with statutory requirements like health and safety procedures isn’t determinative, as all workers must comply with these.

HMRC ’s view

HMRC will consider the worker’s arrangements overall when determining if SDC applies including the terms of the engagement and the way the work is actually done in practice. It won’t be sufficient that the terms of a contract imply a lack of SDC if the reality is otherwise.

Modification for intermediaries within the scope of IR35 legislation

A modification ESM5580 applies when an employment intermediary is within the scope of the intermediaries legislation known as IR35 ESM3000 . In these circumstances whether a worker is subject to SDC isn’t considered. This is regardless of whether IR35 does or doesn’t apply. HMRC considers that this modification can apply when a worker provides their personal services via a PSC and currently in circumstances involving other intermediaries, such as an umbrella company.

However, this modification isn’t applicable if a worker provides their personal services through an employment intermediary which is:

an MSC within the meaning given by section 61B ITEPA , or
would be such a company if all the worker’s income was not employment income, specifically disregarding ITEPA , section 61B(1)(c) ESM5570

In these circumstances, SDC must always be considered along with the basic conditions ESM5530 and regardless of whether or not the employment intermediary is also required to consider IR35 legislation.

Special provisions relating to fraudulent documents and transfer of debt provisions

Special provisions apply where fraudulent documents have been provided to an employment intermediary purporting to show that a worker isn’t subject to (or to the right of) SDC ESM5650 resulting in unpaid tax.

Transfer of debt provisions can apply to unpaid tax debt in certain circumstances when the employment intermediaries travel expense provisions haven’t been applied correctly and a company hasn’t been provided with evidence from which it would be reasonable in all the circumstances to conclude that the worker wasn’t subject to (or the right of) SDC of any person ESM5660 .

For these purposes, the mere assertion by a person that the manner in which the worker provided the services was not subject to (or to the right of) SDC of any person is not such evidence.

ESM5570 - employment intermediaries within the scope of the managed service companies ( MSCs ) legislation, Chapter 9 ITEPA

Income Tax (Earnings and Pensions) Act 2003, Part 2 Chapter 9, section 61A - 61J Social Security Contributions (Managed Service Companies) Regulations 2007 Income Tax (Earnings and Pensions) Act 2003 ( ITEPA ), Part 5, Chapter 2, sections 337 to 339A and Chapter 3, Part 11, section 688B Income Tax (Pay As You Earn) Regulations 2003, Part 4, Chapter 3B Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraphs 3, 3ZA & 3ZB

Where workers personally provide their services through a company the employment intermediaries travel expense provisions apply without modification where:

the employment intermediary is an MSC (within the meaning of ITEPA , section 61B) or
would be such a company disregarding section 61B(1)(c) of ITEPA (So if all the conditions in section 61B(1) are satisfied except section 61B(1)(c) then the employment intermediaries travel expense provisions may apply.).

For guidance about section 61B(1)(c) ITEPA - ESM3500 .

In these cases SDC must always be considered so that for the purposes of the employment intermediaries travel expense provisions the:

basic conditions ESM5530 and the SDC provisions ESM5560 must be considered
modification for employment intermediaries within the scope of the Intermediaries legislation (known as IR35) ESM5580 doesn’t apply, this is regardless of whether the intermediary at (1) or (2) above is also required to consider IR35 legislation

Transfer of liability

When an employment intermediary is an MSC , or would be such a company disregarding section 61B(1)(c) of ITEPA , and:

fails to apply the employment intermediaries travel expense provisions relating to SDC correctly, and
doesn’t have reasonable evidence from any other person in connection with that test, and
doesn’t apply section 339A of ITEPA appropriately resulting in unpaid tax

then liability for the unpaid tax may transfer to:

a director or other office-holder or associate of the employment intermediary
an MSC provider - or a party who would be the MSC provider in cases where the employment intermediary would be an MSC disregarding section 61B(1)(c)
a person who (directly or indirectly) has encouraged or been actively involved in the provision by the employment intermediary of the services of the individual
a director or other office-holder, or an associate, of a person (other than an individual)

For these purposes, ‘associate’, ‘director’ and ‘ MSC provider’ have the meanings given at section 688A of ITEPA - ESM3625. The meaning of ‘ MSC ’ has the meaning given by section 61B of ITEPA but as amended by section 339A (11) of ITEPA .

Example 1 - when the employment intermediary is an MSC - all conditions in section 61B(1) ITEPA are satisfied

Peter works as an IT consultant under arrangements with AB Recruiters (the MSC provider) who manage the provision of his services via his own service company and the associated accounting functions. The MSC legislation applies.

When determining whether the employment intermediaries travel expense provisions apply the basic conditions ESM5530 must be considered and the provisions relating to SDC ESM5560 .

Example 2 - when the employment intermediary would be an MSC - section 61B(1)(c) not satisfied

An agency recently arranged for Bronwyn to set up a service company through an MSC provider. Her services are personally provided to NHS Trusts, the agency pays her PSC amounts for her services and she withdraws a salary subject to PAYE (Pay As You Earn) Income Tax and Class 1 NICs . The agency makes all the arrangements with the clients but the MSC provider deals with all accounting invoices and company returns. Bronwyn is under the control of the client in how she goes about the work.

Section 61B(1)(c) is not satisfied because the payments are made in a way which results in Bronwyn receiving payments of an amount (net of tax and Class 1 NICs ) equal to that which would be received (net of tax and NICs ) if every payment in respect of the services were her employment income. Bronwyn’s company would be an MSC within the meaning of section 61B(1) but disregarding subsection 61B(1)(c). Therefore, when determining whether the employment intermediaries travel expense provisions apply, the basic conditions must be considered ESM5530 and the provisions relating to SDC ESM5560 . As Bronwyn is controlled in how she does her work, the employment intermediaries travel expense rules will apply.

ESM5580 - modified provisions for employment intermediaries within the scope of the intermediaries’ legislation (IR35), Chapter 8 ITEPA

The employment intermediaries travel expense provisions are modified when a worker provides their personal services through an employment intermediary and the engagement falls within the scope of section 49, in Chapter 8 Part 2 ITEPA . This is regardless of whether IR35 does or doesn’t apply as a result of that legislation. In these circumstances, whether the worker is subject to (or to the right of) SDC by any person ESM5560 isn’t considered, unless the intermediary is an MSC .

HMRC considers that this modification will apply (subject to the exception below) when a worker provides their personal services via their own PSC or a partnership or an individual. However, it will also currently apply when a worker is supplied via other intermediaries, such as umbrella companies.

For the purposes of the modification to the employment intermediaries travel expense provisions, in determining whether the IR35 provisions at ITEPA , sections 51, 52 or 53 are or would be met in relation to the employment intermediary:

the words ‘that is not employment income’ are disregarded in section 50(1)(b), and
references to the intermediary are to be read as references to the employment intermediary

Modification applies and worker is an office-holder of client, or would be an office-holder or employee if engaged directly

The employment intermediaries travel expense provisions will apply where:

the basic conditions are met ESM5530 , and
the worker is an office-holder of the client or would be regarded as an office-holder or employee of the client if engaged directly by the client (as determined by the full terms of the arrangements applying the case law tests ESM500 , and
the conditions in section 51, 52 or 53 ITEPA are met in relation to the intermediary (and regardless of whether the worker is paid or has rights to be paid all the remuneration for his services as employment income), and
the intermediary is not an MSC

To determine if the worker would be regarded as an office-holder or employee of the client, it is necessary to consider the actual relationship between the worker and the client and to construct a hypothetical contract. When constructing the hypothetical contract the full actual terms of the arrangements must be taken into account.

Where worker is engaged via his own PSC which is subject to IR35 (or would be but for the fact the worker takes all the PSC ’s income for his services as a salary from the PSC ) then the employment intermediaries travel expense provisions will apply (without the need to consider the SDC test).

HMRC consider that many workers engaged by umbrella companies would be correctly categorised as employees when the full arrangements of the engagement are considered as they apply in practice. In these cases, the employment intermediaries travel expense provisions will apply in those circumstances (without the need to consider the SDC test).

Modification applies and worker is not an office-holder of the client and would not be regarded as an office-holder or employee of the client if engaged directly

The employment intermediaries travel expense provisions won’t apply:

where a contract is within the scope of the intermediaries legislation, and
the worker isn’t an office-holder of the client, and wouldn’t be considered an office-holder or employee of the client if they were directly engaged by the client for the engagement (as determined by the full terms of the arrangements applying the case law tests)
unless the intermediary is an MSC ESM5570

The modification described above relating to employment intermediaries within the scope of IR35 legislation doesn’t apply if the worker personally provides services through a company which is an MSC within the meaning given by section 61B ITEPA , or would be such a company disregarding section 61B(1)(c) ITEPA ESM5570 . This is regardless of whether or not that company also needs to consider IR35 legislation.

Transfer of debt provisions

Where a PSC is working on a contract that is subject to IR35 (or would be but for the fact the worker, or an associate, takes all their remuneration from the intermediary as employment income as described above) then any unpaid tax resulting from not applying section 339A ITEPA appropriately can be transferred to the director(s) or officer(s) of the PSC ESM5670 .

This also currently applies where any employment intermediary doesn’t properly consider that the worker would be considered an employee of the client if they were engaged directly.

ESM5590 - examples of the application of the employment intermediaries’ travel expense provisions

Jim lives in Brighton and is employed through an umbrella company under an overarching contract of employment.

His umbrella company arranges work for Jim at Crawley for 3 months in X Ltd’s warehouse, then in Portsmouth for a further 3 months for Y Ltd and then finally for Z Ltd at Eastbourne for 1 month. X,Y and Z Ltd are not connected companies. At all 3 locations he works under arrangements similar to an employee. He is reimbursed for travel and subsistence costs from home to all 3 destinations (Crawley, Portsmouth and Eastbourne).

Jim isn’t entitled to tax or NICs relief for any of these journeys as the employment intermediaries travel expense provisions means that each of these 3 locations would be treated as a separate employment and so all 3 locations would be classed as permanent workplaces. The payments Jim receives for travel expenses are treated as his earnings for tax and NICs purposes.

As in example 1, Jim is employed under an overarching contract of employment by the umbrella company under arrangements when he would be an employee of the client if engaged directly.

During the 3 months Jim is working in Crawley at X Ltd’s warehouse he is asked to spend 3 days working at X Ltd’s other warehouse in Shoreham.

He isn’t entitled to relief for travel and subsistence in respect of travel to and from Crawley, but is entitled to a deduction under ITEPA section 338 for his travel and subsistence costs to Shoreham, as this is travel to a temporary workplace and is not a new engagement. There’s also a disregard for NICs purposes for his travel and subsistence costs to go to Shoreham.

As in example 1, for the 3 months Jim spends working in Portsmouth he decides to travel to the warehouse on Monday morning and stay in a bed and breakfast from Monday night to Thursday night before travelling back to Brighton on Friday afternoon.

As the workplace in Portsmouth is a permanent workplace under ITEPA section 339A, Jim is not entitled to a deduction for any of his travel and subsistence costs for tax and there is no disregard for NICs .

Paula is a graphic designer and supplies her services through an employment intermediary. She lives in Bradford and works on various assignments, spending one week in York, 2 months in Glasgow, one week in London and 2 months in Exeter.

Paula works under arrangements that are properly seen as being like those of a self-employed person.

The employment intermediaries travel expense provisions don’t apply and she continues to be entitled to tax and NICs relief on reimbursed expenses for travel and subsistence costs from home to all of these locations.

ESM5600 - impact of the employment intermediaries travel expense provisions on a worker’s own PSC which is not an MSC and examples

The employment intermediaries travel expense provisions are modified ESM5580 when a worker provides their personal services through their own employment intermediary which needs to consider and may be subject to the intermediaries legislation, known as IR35 ESM3000 . The most common type of intermediary to which IR35 legislation may apply is a PSC . There is no definition of a PSC for tax purposes but they are often small limited companies through which an owner/director provides their own personal services.

The modification doesn’t apply to PSCs which are MSCs within the meaning given by section 61B ITEPA , or would be such a company disregarding ITEPA , section 61B(1)(c) ESM5570 .

Impact on workers operating via PSCs which are not MSCs (nor would be MSCs disregarding section 61B(1)(c) ITEPA )

From 6 April 2016, where the provisions relating to individuals providing their services via employment intermediaries which need to consider IR35 legislation apply, those workers who supply their services through their own PSC will need to treat each engagement they undertake as a separate employment for the purposes of travel and subsistence:

where they are required to operate the intermediaries’ legislation IR35, or
they would otherwise be operating the IR35 legislation if they weren’t receiving all their remuneration as employment income

This brings the treatment of their travel and subsistence expenses in line with that of other temporary workers and contractors, whilst ensuring that those who operate more like the self-employed are able to claim relief for their travel and subsistence expenses.

Example 1 - IR35 applies

Jeannette works via her PSC , JB Ltd on a 6 month contract providing interior design services to a luxury hotel chain where she works under the direction of the Head of Procurement.

She’s provided with office space at their largest hotel and goes there every day. She always buys lunch in the hotel restaurant. When she travels to the hotel, she is reimbursed for her travel expenses and for the cost of her lunch as a subsistence expense. The intermediaries legislation IR35 applies to the engagement.

The employment intermediaries travel expense provisions apply to Jeannette’s travel and subsistence expense payments because the basic conditions are met and JB Ltd is subject to IR35. She isn’t entitled to tax or NICs relief on her travel expenses. Whether or not Jeannette is subject to SDC doesn’t need to be considered.

Example 2 - IR35 would apply but for remuneration being taken as salary

Dean is an IT Consultant who works as a contractor via his own PSC , DG Ltd. He’s the only director and shareholder. He’s providing his personal services through DG Ltd to a trucking company, T Ltd. Dean works as part of a team under the supervision of T Ltd’s IT director.

Dean is required to travel to T Ltd’s main depot at least 3 times a week and when he does is reimbursed his travel expenses to and from home. He takes all the income of the engagement from DG Ltd as his salary. DG Ltd needs to consider IR35.

It would be subject to IR35 legislation and would need to make a deemed employment payment if Dean did not take all its income from the engagement as his employment income. As such, and because the basic conditions ESM5530 also apply, his travel expenses are subject to the employment intermediaries travel expense provisions. There’s no tax or NICs relief on his travel expenses for any of these journeys. Whether Dean is subject to SDC does not need to be considered.

Example 3 - IR35 considered but doesn’t apply

Asif works via his own PSC as a draughtsman. In the last year his personal services have been supplied to several multinational companies to work on large engineering projects. Asif takes some of his PSC ’s earnings as salary and some as dividends.

Asif’s PSC needs to consider IR35 but the circumstances are such that it isn’t subject to IR35 legislation for any of its contracts. Even though the basic conditions are met, the employment intermediaries travel expense provisions don’t apply because Asif’s PSC is not subject to IR35. This is regardless of whether or not Asif takes some or all of the remuneration his PSC earns from the provision of his services as salary. Whether Asif is under SDC doesn’t need to be considered.

ESM5610 - examples relating to particular employments

In these examples the intermediary isn’t an MSC , nor would be if section 61B(1)(c) ITEPA were disregarded.

Site-based workers

Where a worker is engaged through an employment intermediary, and would be regarded as an employee if engaged directly by the client, then if they are travelling to the same site for all, or almost all, of the engagement, then they won’t be able to claim relief for their travel costs. This is also the case for temporary workers engaged directly or on a fixed term temporary contract through an agency.

Further information - EIM32132 .

Depot workers

Martin is employed as a lorry driver through an employment intermediary and would be regarded as an employee if engaged directly by the client. He picks up his lorry from a depot each morning, where he also receives instructions about his delivery locations for the day. His attendance at that depot at the start and finish of each shift may be brief.

However no relief is available for the cost of travel between his home and the depot. The depot is the base from which the duties of his employment are performed and is a permanent workplace. He’s likely to be able to claim relief on his travel to make deliveries, as this would normally be considered travelling in the performance of his duties.

Further information - EIM32160 .

Travelling appointments

Dave is a service engineer who’s engaged through an employment intermediary, working for a utility company and would be an employee of the utility company if engaged directly. He moves from place to place during the day carrying out repairs to domestic boilers. He receives details of the locations he needs to attend in a day whilst at home, or whilst travelling.

Dave’s work is itinerant; he holds a travelling appointment and is travelling in the performance of his duties. He is able to claim relief on all of his business travelling expenses.

Further information - EIM32366 .

ESM5620 - work on more than one engagement

The employment intermediaries travel expense provisions can apply when workers work on more than one engagement. When:

a worker personally provides services ESM5540 to work on more than one engagement, through
for intermediaries subject to the MSC provisions ESM5570 , they are under the SDC ESM5560 of any party for each of these engagements, or
the worker is an office-holder or would be regarded as an office-holder or employee of the client if engaged directly ESM5580

then the employment intermediaries travel expense provisions apply and each engagement will be treated as a separate employment for the purposes of travel and subsistence. Therefore, tax and NICs relief are unlikely to be available on travel and subsistence expenses, unless the temporary workplace rules still apply - EIM32000 for:

travel between home and any of these engagements, or
for travel between the separate workplaces of any of these engagements

ESM5630 - working rule agreements

Working rule agreements ( WRA ) between employer representatives and trade unions govern, on a national basis, a wide range of terms and conditions of employment for workers in the construction industry and allied industries. Before 6 April 2016, when the rules of a WRA were abided by in their entirety, travel and lodging allowances could be paid tax and NICs free.

However, from 6 April 2016 this will no longer be the case if the employment intermediaries travel expense provisions apply ESM5520 . In these cases HMRC will no longer apply the WRA easement to payments of home to work travel and subsistence to individuals who are working through an employment intermediary.

Where individuals are engaged through an employment intermediary and are paid travel and lodging allowances as part of a WRA , tax and NICs may be payable.

This will only affect the tax and NICs treatment of travel and lodgings allowances. It won’t affect the:

application of the WRA easement to individuals not affected by the employment intermediaries travel expense provisions, nor
other terms and conditions of employment included in WRAs

ESM5640 - arrangements to avoid the application of the employment intermediaries travel expense provisions

Income Tax (Earnings and Pensions) Act 2003 ( ITEPA ), Part 5, Chapter 2, section 339A (10) Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraph 3ZB(7)

If arrangements are put in place, the purpose of which,or one of the main purposes of which, is to ensure that the:

employment intermediaries travel expense provisions don’t apply, and/or
associated provisions relating to fraudulent documents don’t apply, and/or
associated provisions for unpaid debts don’t apply, and/or
associated provisions for the transfer of those debts don’t apply

then those arrangements are to be disregarded for the purposes of deciding if the employment intermediaries travel expense and associated provisions apply.

In this context, ‘arrangements’ include any scheme, transaction or series of transactions, agreement or understanding, whether or not enforceable, and any associated operations.

ESM5650 - fraudulent documents

Income Tax (Earnings and Pensions) Act 2003 ( ITEPA ), Part 5, Chapter 2, section 339A (7), (8) & (9))

HMRC recognises that an employment intermediary may be provided with one or more fraudulent documents intended to demonstrate that the provisions of section 339A don’t apply to a worker’s arrangements, due to the worker not being subject to (or to the right of) SDC by any person as to the manner in which the worker provides their services.

Where such a document is produced, providing the employment intermediary was unaware the document was fraudulent and it has acted upon that document in good faith for PAYE purposes, then the employment intermediary won’t be held to be the employer of the worker for the unpaid tax due as a result of the application of section 339A. The party providing the fraudulent document will instead be held to be the employer of the worker in relation to the tax due on the travel and subsistence payments as explained below.

A fraudulent document is one intentionally produced to misrepresent whether SDC is present in how a worker carries out their role, in order for them to benefit from relief on travel and subsistence.

The provisions relating to fraudulent documents don’t apply where the test of SDC ESM5560 doesn’t need to be considered.

Fraudulent document(s) provided by the client

If, either before or after the worker begins to provide the services, the client provides the employment intermediary with one or more fraudulent documents to demonstrate the worker isn’t subject to (or to the right of) SDC by any person as to the manner in which they provide their services, then after the fraudulent document is provided the worker will be treated as holding an employment with the client (the duties of which consist of the services) in respect of any payments made to which section 339A of ITEPA applies.

The client will be required to account for the unpaid tax as if it arose in respect of earnings from that employment. The client will be responsible for the operation of PAYE for tax purposes, plus any penalties imposed and interest accrued.

Fraudulent document(s) provided by a relevant person

Where the fraudulent document is provided by a ‘relevant person’, the worker will be treated as holding an employment with that relevant person and the relevant person will be required to account for unpaid tax.

In this context, a ‘relevant person’ means a person other than the client, the worker or a person connected with the employment intermediary, who:

is resident, or has a place of business in the UK, and
the services are provided, or
the employment intermediary, or a person connected with the employment intermediary, makes payments in respect of the services

Liabilities of the parties and transfer of debt provisions - ESM5660 .

ESM5660 - liability of the parties and transfer of debt provisions

Income Tax (Earnings and Pensions) Act 2003 ( ITEPA ), Part 5, Chapter 2, sections 337 to 339A, and Part 11, Chapter 3, section 688B Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraphs 3, 3ZA & 3ZB Income Tax (Pay as You Earn) Regulations 20003, Part 4, Chapter 3B

In the first instance, it is the responsibility of the employment intermediary to confirm whether or not section 339A of ITEPA and the equivalent NICs provisions apply in respect of a particular engagement. Liability rests with the employment intermediary who is responsible for deducting, accounting for and paying any tax and NICs due in accordance with the PAYE regulations. If the intermediary fails to do so, then HMRC can issue:

Income Tax determinations under regulation 80 of the Income Tax ( PAYE ) Regulations 2003, and
NICs decisions (under section 8 of the Social Security (Transfer of Functions) Act 1999 in Great Britain)

For individuals and partnerships there will be personal liability as with any other PAYE Income Tax and NICs debt. For companies the liability will initially lie with the company.

When an employment intermediary is a company a relevant PAYE debt which is not paid by the ‘relevant date’ may be transferred to the director(s) or officer(s) of the company, or in the case of an MSC those parties specified in section 688A ITEPA .

The ‘relevant date’ in relation to a relevant PAYE debt is the date on which the first payment is due on which PAYE is not accounted for.

When the provisions of the employment intermediaries travel expenses haven’t been correctly applied, the relevant PAYE debt is the amount of unpaid tax not accounted for by the company in accordance with the PAYE Regulations plus interest. The tax debt can be transferred:

where the employment intermediary has not been provided with evidence from another party from which it would be reasonable to conclude that the worker was not subject to SDC ESM5560 . The mere assertion by a person that the manner in which the worker provided the services wasn’t subject to (or to the right of) SDC of any person is not such evidence
where fraudulent documents have been provided to the employment intermediary by another party ESM5650 , the debt may alternatively transfer to the client or to a relevant party (or their director(s)/officer(s))

PSCs and MSCs

Liability to pay PAYE Income Tax and Class 1 NICs sits with the employment intermediary in the first instance where:

an employment intermediary is within the scope of ITEPA , Part 2, Chapter 8 (the Intermediaries legislation known as IR35) as described at ESM5580 or Chapter 9 (the MSC legislation) as described at ESM5570 , and
there is a deemed employment payment or a deemed employment payment would have been made but for the fact that the worker (or an associate) receives all the remuneration from the intermediary (directly or indirectly) as employment income

However, if the employment intermediary fails to apply section 339A correctly and allows tax relief incorrectly on the amount of a travel and/or subsistence expense, then any underpayment of tax may be transferred to the director(s) or officers(s) of the intermediary. In the case of companies within the scope of the MSC legislation ESM5570 liability can transfer to those parties specified in section 688A ITEPA ESM3625.

For the recovery of unpaid tax relating to travel expenses of workers paid through intermediaries:

company - includes a limited liability partnership
director - has the meaning given by section 67 of ITEPA
employment intermediary - has the same meaning as in section 339A of ITEPA
officer, in relation to a company, means any manager, secretary or other similar officer of the company, or any person acting or purporting to act as such
is an MSC within the meaning given by section 61B, or
would be such a company disregarding subsection (1)(c) of that section

Penalties and Interest

The party to which any unpaid debt is transferred will also be liable for any penalties imposed and interest accrued.

For information about the provision of fraudulent documents - ESM5650 .

ESM5670 - transfer of debt to directors: issue of a personal liability notice

Income Tax (Earnings and Pensions) Act 2003, section 339A Income Tax (Pay As You Earn) Regulations 2003, Chapter 3B Section 688A(5) ITEPA as amended by section 339A(2) of ITEPA

Issuing a ‘personal liability notice’ to company directors

Failure to apply the provisions of section 339A of ITEPA correctly may result in a person other than the employment intermediary becoming liable for the tax debt.

If that party is a company (which includes limited liability partnerships) and it fails or defaults from paying to HMRC the relevant PAYE and/or NICs debt by the required date, then HMRC may hold the director(s) or officer(s) of the company personally responsible for paying the specified amount of the PAYE debt, plus any specified interest. The interest is at the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 86 of Taxes Management Act and runs from the date the notice is served.

In such instances, HMRC may serve a ‘personal liability notice’ on any person who was a director of the company on the relevant date. The relevant date in relation to a PAYE debt is the date on which the first payment is due on which PAYE is not accounted for.

The notice will required the director to pay to HMRC the specified amount of PAYE debt owing and any interest accrued within 30 days of the date the notice is served.

HMRC can serve a ‘personal liability notice’ on more than one director of the company in respect of the same PAYE debt, for which all directors are both jointly and individually liable to pay.

Regulations 97Z(L) and 97Z(M) of Income Tax (Pay as You Earn) Regulations 2003, Part 4, Chapter 3B, and Part 6 of the Taxes Management Act 1970 contain the relevant legislation under which HMRC will recover the sums due under a ‘personal liability notice’ and where appropriate, repay any surplus amounts collected plus interest accrued.

MSCs or those that would be if section 61B(1)(c) were disregarded

Where the intermediary is an MSC or would be if section 61B(1)(c) was disregarded, when there is any unpaid PAYE debt the MSC transfer of debt provisions apply. For guidance about those provisions see from ESM3615 .

This means debts can be transferred to persons who include the:

MSC directors, and
MSC provider (or the person that would be if the intermediary would be an MSC disregarding section 61B(1)(c) ITEPA ) and their directors

Appealing a personal liability notice

There are appeal rights for persons served with a ‘personal liability notice’. A notice of appeal must be submitted to HMRC within 30 days beginning on the day the ‘personal liability notice’ is served and must contain the grounds of appeal which are either that:

all or part of the specified amount does not represent an amount of relevant PAYE debt, of the company, to which regulation 97ZI of the Income Tax (Pay As You Earn) Regulations 2003 applies, or
the person who was served the ‘personal liability notice’ was not a director of the company on the relevant date

A person may not appeal a ‘personal liability notice’ if it has already been determined on appeal by the company that the:

specified amount is a relevant PAYE debt of the company, and
the company did not deduct, account for, or (as the case may be) pay the debt by the time the company was required to do so

On appeal a tribunal may:

uphold or quash the personal liability notice, or
where the appeal is on the grounds that part or all of the specified amount does not represent an amount of a relevant PAYE debt, the tribunal may reduce or increase the specified amount to represent the amount of the relevant PAYE debt of the company for which the director is liable

Where the intermediary is an MSC or would be if section 61B(1)(c) was disregarded, the appeal rights against the transfer of debt provisions are the same as those in the MSC legislation - ESM3640 .

Withdrawal of a personal liability notice

A ‘personal liability notice’ (or in the case of MSCs a transfer notice) may be withdrawn if it is quashed by a tribunal or if an officer of HMRC considers it appropriate to withdraw the notice. In the event that an officer of HMRC withdraws the notice, then HMRC must give notice to the person upon whom that notice was served.

Interpretation.

In relation to Chapter 3B, Income Tax (Pay As You Earn) Regulations 2003 concerning ‘Certain debts of companies under section 339A of ITEPA (Travel expenses of workers providing services through employment intermediaries):

company includes a limited liability partnership
director has the meaning given by section 67 of ITEPA
personal liability notice has the meaning given by regulation 97ZI(2)
the specified amount has the meaning given by regulation 97ZI(2)(a)

Fraudulent documents - ESM5650 . Liability of the parties and transfer of debt provisions - ESM5660 .

ESM5680 - the position for workers engaged through employment intermediaries before 6 April 2016

Income Tax (Earnings and Pensions) Act sections 337 to 342 (as in force before 6 April 2016) Social Security (Contributions) Regulations 2001, Schedule 3, Part 8, paragraph 3 (as in force before 6 April 2016)

A deduction from earnings in respect of travel expenses isn’t available for ordinary commuting which is travel between home (or a place that isn’t a workplace) and a ‘permanent’ workplace. A deduction is generally available for travel in the performance of a worker’s duties or for travel between a worker’s home and a ‘temporary workplace’.

There are a number of criteria for determining whether a workplace is temporary or permanent, but in general a workplace will be a permanent workplace if the worker goes to the same workplace:

in the course of a period of continuous work which lasts, or is likely to last, for more than 24 months, or
for all or almost all of the time for which the worker is likely to hold, or continues to hold, the same employment. This will normally be the case if the worker is employed to work at one place on a fixed term contract

Before 6 April 2016, workers engaged through an employment intermediary, such as an umbrella company, under an overarching contract of employment were able to claim a deduction for tax purposes and a NICs disregard on reimbursed expenses for journeys that would otherwise have been considered ordinary commuting if the worker had been engaged directly or on a temporary agency contract.

This was because the employment intermediary provided ongoing employment on the same terms and conditions, despite all the assignments being temporary contracts for different engagers. These arrangements meant each workplace fell within the statutory definition of a ‘temporary’ workplace (if they were for a period of less than 24 months) and a deduction for the cost of home to work travel and subsistence was allowed.

From 6 April 2016, the introduction of section 339A Income Tax (Earnings and Pensions) Act 2003 and related NICs provisions changed the treatment of travel and subsistence expenses for workers who provide their services through ‘employment intermediaries’ ESM5550 , including recruitment agencies, umbrella companies, PSCs and other similar structures. From that date, when the relevant conditions ESM5530 are met then each assignment is considered to be a separate employment and each workplace is treated as a permanent workplace. This means workers will be regularly commuting to a permanent workplace for each assignment (ordinary commuting) and will not be eligible for tax relief on travel and subsistence expenses, nor will they be entitled to a NICs disregard on reimbursed travel and subsistence expenses.

Employment intermediaries travel expense provisions from 6 April 2016 - ESM5510 onwards.

The treatment of travel and subsistence expenses:

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What Are Travel Expenses?

Understanding travel expenses, the bottom line.

Deductions & Credits
Tax Deductions

Travel Expenses Definition and Tax Deductible Categories

Michelle P. Scott is a New York attorney with extensive experience in tax, corporate, financial, and nonprofit law, and public policy. As General Counsel, private practitioner, and Congressional counsel, she has advised financial institutions, businesses, charities, individuals, and public officials, and written and lectured extensively.

For tax purposes, travel expenses are costs associated with traveling to conduct business-related activities. Reasonable travel expenses can generally be deducted from taxable income by a company when its employees incur costs while traveling away from home specifically for business. That business can include conferences or meetings.

Key Takeaways

Travel expenses are tax-deductible only if they were incurred to conduct business-related activities.
Only ordinary and necessary travel expenses are deductible; expenses that are deemed unreasonable, lavish, or extravagant are not deductible.
The IRS considers employees to be traveling if their business obligations require them to be away from their "tax home” substantially longer than an ordinary day's work.
Examples of deductible travel expenses include airfare, lodging, transportation services, meals and tips, and the use of communications devices.

Travel expenses incurred while on an indefinite work assignment that lasts more than one year are not deductible for tax purposes.

The Internal Revenue Service (IRS) considers employees to be traveling if their business obligations require them to be away from their "tax home" (the area where their main place of business is located) for substantially longer than an ordinary workday, and they need to get sleep or rest to meet the demands of their work while away.

Well-organized records—such as receipts, canceled checks, and other documents that support a deduction—can help you get reimbursed by your employer and can help your employer prepare tax returns. Examples of travel expenses can include:

Airfare and lodging for the express purpose of conducting business away from home
Transportation services such as taxis, buses, or trains to the airport or to and around the travel destination
The cost of meals and tips, dry cleaning service for clothes, and the cost of business calls during business travel
The cost of computer rental and other communications devices while on the business trip

Travel expenses do not include regular commuting costs.

Individual wage earners can no longer deduct unreimbursed business expenses. That deduction was one of many eliminated by the Tax Cuts and Jobs Act of 2017.

While many travel expenses can be deducted by businesses, those that are deemed unreasonable, lavish, or extravagant, or expenditures for personal purposes, may be excluded.

Types of Travel Expenses

Types of travel expenses can include:

Personal vehicle expenses
Taxi or rideshare expenses
Airfare, train fare, or ferry fees
Laundry and dry cleaning
Business meals
Business calls
Shipment costs for work-related materials
Some equipment rentals, such as computers or trailers

The use of a personal vehicle in conjunction with a business trip, including actual mileage, tolls, and parking fees, can be included as a travel expense. The cost of using rental vehicles can also be counted as a travel expense, though only for the business-use portion of the trip. For instance, if in the course of a business trip, you visited a family member or acquaintance, the cost of driving from the hotel to visit them would not qualify for travel expense deductions .

The IRS allows other types of ordinary and necessary expenses to be treated as related to business travel for deduction purposes. Such expenses can include transport to and from a business meal, the hiring of a public stenographer, payment for computer rental fees related to the trip, and the shipment of luggage and display materials used for business presentations.

Travel expenses can also include operating and maintaining a house trailer as part of the business trip.

Can I Deduct My Business Travel Expenses?

Business travel expenses can no longer be deducted by individuals.

If you are self-employed or operate your own business, you can deduct those "ordinary and necessary" business expenses from your return.

If you work for a company and are reimbursed for the costs of your business travel , your employer will deduct those costs at tax time.

Do I Need Receipts for Travel Expenses?

Yes. Whether you're an employee claiming reimbursement from an employer or a business owner claiming a tax deduction, you need to prepare to prove your expenditures. Keep a running log of your expenses and file away the receipts as backup.

What Are Reasonable Travel Expenses?

Reasonable travel expenses, from the viewpoint of an employer or the IRS, would include transportation to and from the business destination, accommodation costs, and meal costs. Certainly, business supplies and equipment necessary to do the job away from home are reasonable. Taxis or Ubers taken during the business trip are reasonable.

Unreasonable is a judgment call. The boss or the IRS might well frown upon a bill for a hotel suite instead of a room, or a sports car rental instead of a sedan.

Individual taxpayers need no longer fret over recordkeeping for unreimbursed travel expenses. They're no longer tax deductible by individuals, at least until 2025 when the provisions in the latest tax reform package are due to expire or be extended.

If you are self-employed or own your own business, you should keep records of your business travel expenses so that you can deduct them properly.

Internal Revenue Service. " Topic No. 511, Business Travel Expenses ."

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Page 13.

Internal Revenue Service. " Publication 5307, Tax Reform Basics for Individuals and Families ," Page 7.

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Pages 6-7, 13-14.

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Page 4.

Internal Revenue Service. " Publication 5307, Tax Reform Basics for Individuals and Families ," Pages 5, 7.

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WAGE AND HOUR DIVISION

UNITED STATES DEPARTMENT OF LABOR

Fact Sheet #78F: Inbound and Outbound Transportation Expenses, and Visa and Other Related Fees under the H-2B Program

The Department of Labor Appropriations Act, 2016, Division H, Title I of Public Law 114-113 ("2016 DOL Appropriations Act"), provides that the Department of Labor ("Department") may not use any funds to enforce the definition of corresponding employment found in 20 CFR 655.5 or the three-fourths guarantee rule definition found in 20 CFR 655.20, or any reference thereto. See Sec. 113. This appropriations rider has been included in the continuing resolutions that have passed throughout FY2017 and FY2018, and the Department remains prohibited from enforcing these provisions or any reference thereto. However, the 2016 DOL Appropriations Act and continuing resolutions did not vacate these regulatory provisions, and they remain in effect, thus imposing a legal duty on H-2B employers, even though the Department will not use any funds to enforce them until such time as the rider may be lifted

This fact sheet provides general information concerning an employer’s obligations regarding travel, visa, and related expenses for workers employed under the H-2B program for H-2B applications submitted on or after April 29, 2015. An employer employing H-2B workers and/or workers in corresponding employment under a certified Application for Temporary Employment Certification (Application) must agree as part of the Application to comply with the following requirements.

Does an H-2B employer have to provide workers with inbound and outbound travel?

Yes, under certain conditions, the H-2B employer is liable for inbound and outbound transportation and daily subsistence – including meals and lodging – to the place of employment, regardless of whether the H-2B workers will come to the job from their home community outside the United States or are already in the United States and are changing H-2B employers. This requirement also extends to corresponding U.S. applicants hired for the job who come from far enough away from the worksite that it is not reasonable to return home each day.

When is an employer required to provide inbound and outbound transportation?

The employer must provide or reimburse the worker for transportation and subsistence from the place from which the worker has come to work for the employer (the place of recruitment) if the worker completes 50 percent of the period of employment covered by the job order. The employer must provide outbound transportation and subsistence to workers who work until the end of the job order or who are dismissed for any reason before the end of the job order.

If the worker has no immediate plans to work for another H-2B employer, then the employer must provide transportation and subsistence to the place from which the worker originally departed to work for the employer, ignoring any intervening employment. The current employer is not liable for outbound transportation and subsistence to workers immediately changing employment and moving to another authorized H-2B employer when the subsequent employer has agreed in its job order to provide transportation and subsistence to its worksite.

The employer is not required to provide outbound transportation or subsistence if the worker abandons the job before the end of the period of employment certified on the Application.

How may the employer provide for transportation, what must be paid for, and must it be disclosed?

The amount of inbound and outbound transportation payments must be at least equal to the costs charged by the most economical and reasonable common carrier for the distances involved. In addition, H-2B employers must also pay the workers a daily subsistence amount to provide for meals while traveling. Subsistence would also include lodging required during an H-2B worker’s travel from their hometown to the consular city to wait to obtain a visa and from there to the place of employment. All appropriate transportation and subsistence must not only be provided to H-2B workers but also to corresponding U.S. applicants who are unable to reasonably return to their residence each day.

The employer may fulfill its inbound travel obligation in one of several ways: by actually providing the transportation, arranging and paying for it directly, or advancing the reasonable cost of the transportation to the worker before the worker departs. The employer may also reimburse the worker after the worker completes 50 percent of the period of employment covered by the job order (assuming the employer has not already paid for the transportation).

If it is prevailing practice of non-H-2B employers in the area to provide or pay for the costs in advance, the employer must do so. If the employer advances the required transportation and subsistence costs to its H-2B workers, it must also advance transportation and subsistence costs to those workers in corresponding employment who are unable to reasonably return to their residence each day.

The employer may be obligated under the FLSA to reimburse workers for their inbound travel during their first workweek to the extent that their travel costs would bring them below the Federal minimum wage. See below.

The employer may fulfill its outbound travel obligation by actually providing the travel, by arranging and paying for it directly, or by reimbursing the worker during the last workweek of employment.

Finally, the employer must disclose in the job order and required newspaper advertisements that inbound and outbound travel and daily subsistence will be provided. Additionally, the employer’s job order must detail how inbound travel and subsistence will be provided.

What are an employer’s obligations regarding inbound travel under the FLSA?

The FLSA applies independently of H-2B and requires employers covered by the FLSA to pay costs that are primarily for the benefit of the employer if such costs would take a non-exempt employee’s wages below the FLSA minimum wage. As discussed in the preamble to the 2015 H-2B Interim Final Rule (published April 29, 2015), the Department views the inbound transportation costs to be primarily for the benefit of the H-2B employer. Under the FLSA, there is no difference between deducting a cost directly from a worker’s wages and shifting a cost to the worker. Therefore, failure to reimburse such worker-incurred costs would be a de facto deduction from the first week’s wages that would constitute a minimum wage violation under the FLSA for employers subject to the Act if bearing such costs would effectively bring the worker’s wages below the minimum wage.

This principle does not apply to the reimbursement of meal costs as the FLSA regulations state that meals are always regarded as primarily for the benefit and convenience of the employee. Thus, the employer’s FLSA obligation does not extend to the first workweek reimbursement of meal costs.

For example, if the worker incurred $200.00 for the most reasonable and economical cost of common carrier transportation from the home community to the place of employment, an FLSA-covered, non-exempt employer is obligated to reimburse the full $200.00 amount in the first workweek in order to ensure that the employee receives at least the FLSA minimum wage and must pay at least the FLSA minimum wage for each hour worked. Once this amount has been reimbursed, the employer may elect to recoup this money in subsequent workweeks by making deductions from the worker’s paycheck to the extent that such deductions do not violate the FLSA minimum wage requirement. The employer can deduct the difference between the H-2B offered wage and the FLSA minimum wage multiplied by the number of hours worked per week, provided the deduction was properly disclosed to the worker in the job order. The deductions may only be made until the employer has recouped the entire transportation cost. In no case may this deduction be made after the 50 percent point of the work contract. Upon the worker completing 50 percent of the job order period, an employer who makes such a deduction to recoup inbound travel expenses must reimburse such costs to the worker to comply with the H-2B requirements.

It is important to remember that undisclosed deductions are impermissible and will be treated as a violation of the H-2B requirements. Therefore, if an employer intends to make a deduction for transportation expenses, this must be fully disclosed in the job order.

Must an employer pay for the H-2B employee’s visa and other related fees?

The employer must either pay or reimburse the H-2B worker in the first workweek for any visa, visa processing, and other related fees incurred by the worker. But an employer need not pay passport or other charges primarily for the benefit of the worker.

What if an employer engages a third party to recruit H-2B workers?

The employer must contractually prohibit in writing any agent or recruiter (or any agent or employee of such agent or recruiter) whom the employer engages, directly or indirectly, in recruitment of H-2B workers from seeking or receiving payments or other compensation from prospective workers. This documentation must be made available upon request by the Certifying Officer or other Federal representative. In addition, the employer and its attorney, agents, or employees cannot seek or receive payment of any kind from the worker for recruitment costs.

Where to Obtain Additional Information

For additional information, visit our Wage and Hour Division Website: http://www.dol.gov/agencies/whd and/or call our toll-free information and helpline, available 8 a.m. to 5 p.m. in your time zone, 1-866-4USWAGE (1-866-487-9243).

This publication is for general information and is not to be considered in the same light as official statements of position contained in the regulations.

The contents of this document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.

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Tax Deductions for Business Travelers

When you are self-employed, you generally can deduct the ordinary and necessary expenses of traveling away from home for business from your income. But before you start listing travel deductions, make sure you understand what the Internal Revenue Service (IRS) means by "home," "business," and "ordinary and necessary expenses."

Ordinary vs. necessary expenses

Business home, not home sweet home, transportation expenses on a business trip are deductible, fees for getting around are deductible, lodging, meals and tips are deductible.

Key Takeaways

Typically, you can deduct travel expenses if they are ordinary (common and accepted in your industry) and necessary (helpful and appropriate for your business).
You can deduct business travel expenses when you are away from both your home and the location of your main place of business (tax home).
Deductible expenses include transportation, baggage fees, car rentals, taxis and shuttles, lodging, tips, and fees.
You can also deduct 50% of either the actual cost of meals or the standard meal allowance, which is based on the federal meals and incidental expense per diem rate.

The IRS defines expense ordinary and necessary expenses this way:

An expense is ordinary if it is common and accepted in your industry
An expense is necessary if it is helpful and appropriate for your business

You can claim business travel expenses when you're away from home but "home" doesn't always mean where your family lives. You also have a tax home—the city where your main place of business is located—which may not be the same as the location of your family home.

For example, if you live in Petaluma, California but your permanent work location is in San Jose where you stay in hotels and eat out during the work week, you typically can't deduct your expenses in San Jose or your transportation home on weekends.

In this situation San Jose is your tax home , so no deductions are permitted for ordinary and necessary expenses there.
Your trips to your home in Petaluma are not mandated by business.

Go by plane, train or bus—the actual cost of the ticket to ride is deductible, as well as any baggage fees. If you have to pay top dollar for a last-minute flight, the high-priced ticket is a business expense, but if you use frequent-flyer miles for a free ticket, the deduction is zero.

If you decide to rent a car to go on a business trip, the car rental is deductible. If you drive your own vehicle, you can usually take actual costs or the IRS standard mileage rate. For 2023 the rate is 65.5 cents per mile. You also can add tolls and parking costs onto your deduction. This amount increases to 67 cents per mile for 2024.

TurboTax Tip: Even if you use the federal meals and incidental expense per diem rates to calculate your deductions, be sure to keep receipts from all your meals and incidental expenses.

Fares for taxis or shuttles can be deducted as business travel expenses. For example, you can deduct the fare or other costs to go to:

Airport or train station
Hotel from the airport or train station
Between your hotel and the work location
Between clients in the area

If you rent a car when you arrive at your destination, the expense is deductible as long as the car is used exclusively for business. If you use it both for business and personal purposes, you can only deduct the portion of the rental used for business.

The IRS allows business travelers to deduct business-related meals and hotel costs, as long as they are reasonable considering the circumstances—not lavish or extravagant.

You would have to eat if you were home, so this might explain why the IRS limits meal deductions to 50% of either the:

Actual cost of the meal
Standard meal allowance

This allowance is based on the federal meals and incidental expense per diem rate that depends on where and when you travel.

Generally, you can deduct 50% of the cost of meals. Alternatively, if you do not incur any meal expenses nor claim the standard meal allowance, you can deduct the amount of $5 per day for incidental expenses. You can also deduct incidental expenses, such as:

Fees and tips given to hotel staff
Fees for porters and baggage carriers

But don't forget to keep track of the actual costs.

Let a local tax expert matched to your unique situation get your taxes done 100% right with TurboTax Live Full Service . Your expert will uncover industry-specific deductions for more tax breaks and file your taxes for you. Backed by our Full Service Guarantee . You can also file taxes on your own with TurboTax Premium . We’ll search over 500 deductions and credits so you don’t miss a thing.

Get unlimited advice, an expert final review and your maximum refund, guaranteed .

~37% of filers qualify. Simple Form 1040 returns only (no schedules except for Earned Income Tax Credit, Child Tax Credit and student loan interest).

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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Examples of situations not included in a simple Form 1040 return:

Itemized deductions claimed on Schedule A, like charitable contributions, medical expenses, mortgage interest and state and local tax deductions
Unemployment income reported on a 1099-G
Business or 1099-NEC income (often reported by those who are self-employed, gig workers or freelancers)
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TURBOTAX ONLINE/MOBILE

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TurboTax Premium Pricing Comparison: Cost savings based on a comparison of TurboTax product prices to average prices set forth in the 2020-2021 NSA Fees-Acct-Tax Practices Survey Report.
1099-K Snap and Autofill: Available in mobile app and mobile web only.
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Average Refund Amount: Sum of $3140 is the average refund American taxpayers received based upon IRS data date ending 2/17/23 and may not reflect actual refund amount received.
Average Deduction Amount: Based on the average amount of deductions/expenses found by TurboTax Self Employed customers who filed expenses on Schedule C in Tax Year 2022 and may not reflect actual deductions found.
More self-employed deductions based on the median amount of expenses found by TurboTax Premium (formerly Self Employed) customers who synced accounts, imported and categorized transactions compared to manual entry. Individual results may vary.
TurboTax Online Business Products: For TurboTax Live Assisted Business and TurboTax Full Service Business, we currently don’t support the following tax situations: C-Corps (Form 1120-C), Trust/Estates (Form 1041), Multiple state filings, Tax Exempt Entities/Non-Profits, Entities electing to be treated as a C-Corp, Schedule C Sole proprietorship, Payroll, Sales tax, Quarterly filings, and Foreign Income. TurboTax Live Assisted Business is currently available only in AK, AZ, CA, CO, CT, DE, FL, GA, IL, KS, MA, MD, ME, MI, MN, MO, NC, NJ, NV, NY, OH, PA, RI, SD, TN, TX, UT, VA, WA, WV and WY.
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TURBOTAX DESKTOP GUARANTEES

TurboTax Desktop Individual Returns:

100% Accurate Calculations Guarantee – Individual Returns: If you pay an IRS or state penalty or interest because of a TurboTax calculation error, we’ll pay you the penalty and interest. Excludes payment plans. This guarantee is good for the lifetime of your personal, individual tax return, which Intuit defines as seven years from the date you filed it with TurboTax Desktop. Excludes TurboTax Desktop Business returns. Additional terms and limitations apply. See License Agreement for details.
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TurboTax Desktop Business Returns:

100% Accurate Calculations Guarantee – Business Returns: If you pay an IRS or state penalty or interest because of a TurboTax calculation error, we’ll pay you the penalty and interest. Excludes payment plans. You are responsible for paying any additional tax liability you may owe. Additional terms and limitations apply. See License Agreement for details.
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TURBOTAX DESKTOP

Installation Requirements: Product download, installation and activation requires an Intuit Account and internet connection. Product limited to one account per license code. You must accept the TurboTax License Agreement to use this product. Not for use by paid preparers.
TurboTax Desktop Products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees may apply for e-filing state returns. E-file fees may not apply in certain states, check here for details . Savings and price comparison based on anticipated price increase. Software updates and optional online features require internet connectivity.
Fastest Refund Possible: Fastest federal tax refund with e-file and direct deposit; tax refund time frames will vary. The IRS issues more than 9 out of 10 refunds in less than 21 days.
Average Refund Amount: Sum of $3140 is the average refund American taxpayers received based upon IRS data date ending 02/17/23 and may not reflect actual refund amount received.
TurboTax Product Support: Customer service and product support hours and options vary by time of year.
#1 Best Selling Tax Software: Based on aggregated sales data for all tax year 2022 TurboTax products.
Deduct From Your Federal Refund: A $40 Refund Processing Service fee may apply to this payment method. Prices are subject to change without notice.
Data Import: Imports financial data from participating companies; Requires Intuit Account. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2021 and higher) and QuickBooks Desktop (2021 and higher); both Windows only. Quicken import not available for TurboTax Desktop Business. Quicken products provided by Quicken Inc., Quicken import subject to change.
Audit Defense: Audit Defense is a third-party add-on service provided, for a fee, by TaxResources, Inc., dba Tax Audit. See Membership Agreements at https://turbotax.intuit.com/corp/softwarelicense/ for service terms and conditions.

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Compensatory Time Off for Travel - Questions & Answers to Fact Sheet

Q1. What is compensatory time off for travel? View more A. Compensatory time off for travel is a separate form of compensatory time off that may be earned by an employee for time spent in a travel status away from the employee's official duty station when such time is not otherwise compensable.
Q2. Are all employees covered by this provision? View more A. The compensatory time off provision applies to an "employee" as defined in 5 U.S.C. 5541(2) who is employed in an "Executive agency" as defined in 5 U.S.C. 105, without regard to whether the employee is exempt from or covered by the overtime pay provisions of the Fair Labor Standards Act of 1938, as amended. For example, this includes employees in senior-level (SL) and scientific or professional (ST) positions, but not members of the Senior Executive Service or Senior Foreign Service or Foreign Service officers. Effective April 27, 2008, prevailing rate (wage) employees are covered under the compensatory time off for travel provision. (See CPM 2008-04 .)
Q3. Are intermittent employees eligible to earn compensatory time off for travel? View more A. No. Compensatory time off for travel may be used by an employee when the employee is granted time off from his or her scheduled tour of duty established for leave purposes. (See 5 CFR 550.1406(b).) Also see the definition of "scheduled tour of duty for leave purposes" in 5 CFR 550.1403. Employees who are on intermittent work schedules are not eligible to earn and use compensatory time off for travel because they do not have a scheduled tour of duty for leave purposes.
Q4. What qualifies as travel for the purpose of this provision? View more A. To qualify for this purpose, travel must be officially authorized. In other words, travel must be for work purposes and must be approved by an authorized agency official or otherwise authorized under established agency policies. (Also see Q5.)
Q5. May an employee earn compensatory time off when he or she travels in conjunction with the performance of union representational duties? View more A. No. The term "travel" is defined at 5 CFR 550.1403 to mean officially authorized travel—i.e., travel for work purposes approved by an authorized agency official or otherwise authorized under established agency policies. The definition specifically excludes time spent traveling in connection with union activities. The term "travel for work purposes" is intended to mean travel for agency-related work purposes. Thus, employees who travel in connection with union activities are not entitled to earn compensatory time off for travel because they are traveling for the benefit of the union, and not for agency-related work purposes.
Q6. An employee receives compensatory time off for travel only for those hours spent in a travel status. What qualifies as time in a travel status? View more A. Travel status includes only the time actually spent traveling between the official duty station and a temporary duty station, or between two temporary duty stations, and the usual waiting time that precedes or interrupts such travel.
Q7. Is travel in connection with a permanent change of station (PCS) creditable for compensatory time off for travel? View more A. Although PCS travel is officially authorized travel, it is not travel between an official duty station and a temporary duty station or between two temporary duty stations. Therefore, it is not considered time in a travel status for the purpose of earning compensatory time off for travel.
Q8. What is meant by "usual waiting time"? View more A. Airline travelers generally are required to arrive at the airport at a designated pre-departure time (e.g., 1 or 2 hours before the scheduled departure, depending on whether the flight is domestic or international). Such waiting time at the airport is considered usual waiting time and is creditable time in a travel status. In addition, time spent at an intervening airport waiting for a connecting flight (e.g., 1 or 2 hours) also is creditable time in a travel status. In all cases, determinations regarding what is creditable as "usual waiting time" are within the sole and exclusive discretion of the employing agency.
Q9. What if an employee experiences an "extended" waiting period? View more A. If an employee experiences an unusually long wait prior to his or her initial departure or between actual periods of travel during which the employee is free to rest, sleep, or otherwise use the time for his or her own purposes, the extended waiting time outside the employee's regular working hours is not creditable time in a travel status. An extended waiting period that occurs during an employee's regular working hours is compensable as part of the employee's regularly scheduled administrative workweek.
Q10. Do meal periods count as time in a travel status? View more A. Meal periods during actual travel time or waiting time are not specifically excluded from creditable time in a travel status for the purpose of earning compensatory time off for travel. However, determinations regarding what is creditable as "usual waiting time" are within the sole and exclusive discretion of the employing agency.
Q11. What happens once an employee reaches a temporary duty station? View more A. Time spent at a temporary duty station between arrival and departure is not creditable travel time for the purpose of earning compensatory time off for travel. Time in a travel status ends when the employee arrives at the temporary duty worksite or his or her lodging in the temporary duty station, wherever the employee arrives first. Time in a travel status resumes when an employee departs from the temporary duty worksite or his or her lodging in the temporary duty station, wherever the employee departs last.
Q12. When is it appropriate for an agency to offset creditable time in a travel status by the amount of time the employee spends in normal commuting between home and work? View more A. If an employee travels directly between his or her home and a temporary duty station outside the limits of the employee's official duty station (e.g., driving to and from a 3-day conference), the agency must deduct the employee's normal home-to-work/work-to-home commuting time from the creditable travel time. The agency must also deduct an employee's normal commuting time from the creditable travel time if the employee is required—outside of regular working hours—to travel between home and a transportation terminal (e.g., an airport or train station) outside the limits of the employee's official duty station.
Q13. What if an employee travels to a transportation terminal within the limits of his or her official duty station? View more A. An employee's time spent traveling outside of regular working hours to or from a transportation terminal within the limits of his or her official duty station is considered equivalent to commuting time and is not creditable time in a travel status for the purpose of earning compensatory time off for travel.
Q14. What if an employee travels from a worksite to a transportation terminal? View more A. If an employee travels between a worksite and a transportation terminal, the travel time outside regular working hours is creditable as time in a travel status, and no commuting time offset applies. For example, after completing his or her workday, an employee may travel directly from the regular worksite to an airport to attend an out-of-town meeting the following morning. The travel time between the regular worksite and the airport is creditable as time in a travel status.
Q15. What if an employee elects to travel at a time other than the time selected by the agency? View more A. When an employee travels at a time other than the time selected by the agency, the agency must determine the estimated amount of time in a travel status the employee would have had if the employee had traveled at the time selected by the agency. The agency must credit the employee with the lesser of (1) the estimated time in a travel status the employee would have had if the employee had traveled at the time selected by the agency, or (2) the employee's actual time in a travel status at a time other than that selected by the agency.
Q16. How is an employee's travel time calculated for the purpose of earning compensatory time off for travel when the travel involves two or more time zones? View more A. When an employee's travel involves two or more time zones, the time zone from point of first departure must be used to determine how many hours the employee actually spent in a travel status for the purpose of accruing compensatory time off for travel. For example, if an employee travels from his official duty station in Washington, DC, to a temporary duty station in San Francisco, CA, the Washington, DC, time zone must be used to determine how many hours the employee spent in a travel status. However, on the return trip to Washington, DC, the time zone from San Francisco, CA, must be used to calculate how many hours the employee spent in a travel status.
Q17. How is compensatory time off for travel earned and credited? View more A. Compensatory time off for travel is earned for qualifying time in a travel status. Agencies may authorize credit in increments of one-tenth of an hour (6 minutes) or one-quarter of an hour (15 minutes). Agencies must track and manage compensatory time off for travel separately from other forms of compensatory time off.
Q18. Is there a limitation on the amount of compensatory time off for travel an employee may earn? View more A. No.
Q19. How does an employee request credit for compensatory time off for travel? View more A. Agencies may establish procedures for requesting credit for compensatory time off for travel. An employee must comply with his or her agency's procedures for requesting credit of compensatory time off, and the employee must file a request for such credit within the time period established by the agency. An employee's request for credit of compensatory time off for travel may be denied if the request is not filed within the time period required by the agency.
Q20. Is there a form employees must fill out for requests to earn or use compensatory time off for travel? View more A. There is not a Governmentwide form used for requests to earn or use compensatory time off for travel. However, an agency may choose to develop a form as part of its internal policies and procedures.
Q21. How does an employee use accrued compensatory time off for travel? View more A. An employee must request permission from his or her supervisor to schedule the use of his or her accrued compensatory time off for travel in accordance with agency policies and procedures. Compensatory time off for travel may be used when the employee is granted time off from his or her scheduled tour of duty established for leave purposes. Employees must use accrued compensatory time off for travel in increments of one-tenth of an hour (6 minutes) or one-quarter of an hour (15 minutes).
Q22. In what order should agencies charge compensatory time off for travel? View more A. Agencies must charge compensatory time off for travel in the chronological order in which it was earned, with compensatory time off for travel earned first being charged first.
Q23. How long does an employee have to use accrued compensatory time off for travel? View more A. An employee must use his or her accrued compensatory time off for travel by the end of the 26th pay period after the pay period during which it was earned or the employee must forfeit such compensatory time off, except in certain circumstances. (See Q24 and Q25 for exceptions.)
Q24. What if an employee is unable to use his or her accrued compensatory time off for travel because of uniformed service or an on-the-job injury with entitlement to injury compensation? View more A. Unused compensatory time off for travel will be held in abeyance for an employee who separates, or is placed in a leave without pay status, and later returns following (1) separation or leave without pay to perform service in the uniformed services (as defined in 38 U.S.C. 4303 and 5 CFR 353.102) and a return to service through the exercise of a reemployment right or (2) separation or leave without pay due to an on-the-job injury with entitlement to injury compensation under 5 U.S.C. chapter 81. The employee must use all of the compensatory time off for travel held in abeyance by the end of the 26th pay period following the pay period in which the employee returns to duty, or such compensatory time off for travel will be forfeited.
Q25. What if an employee is unable to use his or her accrued compensatory time off for travel because of an exigency of the service beyond the employee's control? View more A. If an employee fails to use his or her accrued compensatory time off for travel before the end of the 26th pay period after the pay period during which it was earned due to an exigency of the service beyond the employee's control, the head of an agency, at his or her sole and exclusive discretion, may extend the time limit for up to an additional 26 pay periods.
Q26. May unused compensatory time off for travel be restored if an employee does not use it by the end of the 26th pay period after the pay period during which it was earned? View more A. Except in certain circumstances (see Q24 and Q25), any compensatory time off for travel not used by the end of the 26th pay period after the pay period during which it was earned must be forfeited.
Q27. What happens to an employee's unused compensatory time off for travel upon separation from Federal service? View more A. Except in certain circumstances (see Q24), an employee must forfeit all unused compensatory time off for travel upon separation from Federal service.
Q28. May an employee receive a lump-sum payment for accrued compensatory time off for travel upon separation from an agency? View more A. No. The law prohibits payment for unused compensatory time off for travel under any circumstances.
Q29. What happens to an employee's accrued compensatory time off for travel upon transfer to another agency? View more A. When an employee voluntarily transfers to another agency (including a promotion or change to lower grade action), the employee must forfeit all of his or her unused compensatory time off for travel.
Q30. What happens to an employee's accrued compensatory time off for travel when the employee moves to a position that is not covered by the regulations in 5 CFR part 550, subpart N? View more A. When an employee moves to a position in an agency not covered by the compensatory time off for travel provisions (e.g., the United States Postal Service), the employee must forfeit all of his or her unused compensatory time off for travel. However, the gaining agency may use its own legal authority to give the employee credit for such compensatory time off.
Q31. Is compensatory time off for travel considered in applying the premium pay and aggregate pay caps? View more A. No. Compensatory time off for travel may not be considered in applying the biweekly or annual premium pay limitations established under 5 U.S.C. 5547 or the aggregate limitation on pay established under 5 U.S.C. 5307.
Q32. When are criminal investigators who receive availability pay precluded from earning compensatory time off for travel? View more A. Compensatory time off for travel is earned only for hours not otherwise compensable. The term "compensable" is defined at 5 CFR 550.1403 to include any hours of a type creditable under other compensation provisions, even if there are compensation caps limiting the payment of premium pay for those hours (e.g., the 25 percent cap on availability pay and the biweekly premium pay cap). For availability pay recipients, this means hours of travel are not creditable as time in a travel status for compensatory time off purposes if the hours are (1) compensated by basic pay, (2) regularly scheduled overtime hours creditable under 5 U.S.C. 5542, or (3) "unscheduled duty hours" as described in 5 CFR 550.182(a), (c), and (d).
Q33. What constitutes "unscheduled duty hours" as described in 5 CFR 550.182(a), (c), and (d)? View more A. Under the availability pay regulations, unscheduled duty hours include (1) all irregular overtime hours—i.e., overtime work not scheduled in advance of the employee's administrative workweek, (2) the first 2 overtime hours on any day containing part of the employee's basic 40-hour workweek, without regard to whether the hours are unscheduled or regularly scheduled, and (3) any approved nonwork availability hours. However, special agents in the Diplomatic Security Service of the Department of State may count only hours actually worked as unscheduled duty hours.
Q34. Why are criminal investigators who receive availability pay precluded from earning compensatory time off when they travel during unscheduled duty hours? View more A. The purpose of availability pay is to ensure the availability of criminal investigators (and certain similar law enforcement employees) for unscheduled duty in excess of a 40-hour workweek based on the needs of the employing agency. Availability pay compensates an employee for all unscheduled duty hours. Compensatory time off for travel is earned only for hours not otherwise compensable. Thus, availability pay recipients may not earn compensatory time off for travel during unscheduled duty hours because the employees are entitled to availability pay for those hours.

A. When an employee who receives availability pay is required to travel on a non-workday or on a regular workday (during hours that exceed the employee's basic 8-hour workday), and the travel does not meet one of the four criteria in 5 U.S.C. 5542(b)(2)(B) and 5 CFR 550.112(g)(2), the travel time is not compensable as overtime hours of work under regular overtime or availability pay. Thus, the employee may earn compensatory time off for such travel, subject to the exclusion specified in 5 CFR 550.1404(b)(2) and the requirements in 5 CFR 550.1404(c),(d), and (e).

Under the provisions in 5 U.S.C. 5542(b)(2)(B) and 5 CFR 550.112(g)(2), travel time is compensable as overtime hours of work if the travel is away from the employee's official duty station and—

(i) involves the performance of work while traveling, (ii) is incident to travel that involves the performance of work while traveling, (iii) is carried out under arduous conditions, or (iv) results from an event which could not be scheduled or controlled administratively.

The phrase "an event which could not be scheduled or controlled administratively" refers to the ability of an agency in the Executive Branch of the United States Government to control the scheduling of an event which necessitates an employee's travel. If the employing agency or another Executive Branch agency has any control over the scheduling of the event, including by means of approval of a contract for it, then the event is administratively controllable, and the travel to and from the event cannot be credited as overtime hours of work.

For example, an interagency conference sponsored by the Department of Justice would be considered a joint endeavor of the participating Executive Branch agencies and within their administrative control. Under these circumstances, the travel time outside an employee's regular working hours is not compensable as overtime hours of work under regular overtime or availability pay. Therefore, the employee may earn compensatory time off for such travel, subject to the exclusion specified in 5 CFR 550.1404(b)(2) and the requirements in 5 CFR 550.1404(c), (d), and (e).

Q36. If an employee is required to travel on a Federal holiday (or an "in lieu of" holiday), is the employee entitled to receive compensatory time off for travel? View more A. Although most employees do not receive holiday premium pay for time spent traveling on a holiday (or an "in lieu of" holiday), an employee continues to be entitled to pay for the holiday in the same manner as if the travel were not required. Thus, an employee may not earn compensatory time off for travel during basic (non-overtime) holiday hours because the employee is entitled to his or her rate of basic pay for those hours. Compensatory time off for travel may be earned by an employee only for time spent in a travel status away from the employee's official duty station when such time is not otherwise compensable.
Q37. If an employee's regularly scheduled tour of duty is Sunday through Thursday and the employee is required to travel on a Sunday during regular working hours, is the employee entitled to earn compensatory time off for travel? View more A. No. Compensatory time off for travel may be earned by an employee only for time spent in a travel status away from the employee's official duty station when such time is not otherwise compensable. Thus, an employee may not earn compensatory time off for travel for traveling on a workday during regular working hours because the employee is receiving his or her rate of basic pay for those hours.
Q38. May an agency change an employee's work schedule for travel purposes? View more A. An agency may not adjust the regularly scheduled administrative workweek that normally applies to an employee (part-time or full-time) solely for the purpose of including planned travel time not otherwise considered compensable hours of work. However, an employee is entitled to earn compensatory time off for travel for time spent in a travel status when such time is not otherwise compensable.
Q39. Is time spent traveling creditable as credit hours for an employee who is authorized to earn credit hours under an alternative work schedule? View more A. Credit hours are hours an employee elects to work, with supervisory approval, in excess of the employee's basic work requirement under a flexible work schedule. Under certain conditions, an agency may permit an employee to earn credit hours by performing productive and essential work while in a travel status. See OPM's fact sheet on credit hours for the conditions that must be met. If those conditions are met and the employee does earn credit hours for travel, the time spent traveling would be compensable and the employee would not be eligible to earn compensatory time off for travel. If the conditions are not met, the employee would be eligible to earn compensatory time off for travel.
Q40. May an agency restore an employee's forfeited "use-or-lose" annual leave because the employee elected to use earned compensatory time off for travel instead of using his or her excess annual leave? View more A. Section 6304(d) of title 5, United States Code, prescribes the conditions under which an employee's forfeited annual leave may be restored to an employee. (See fact sheet on restoration of annual leave .) There is no legal authority to restore an employee's forfeited annual leave because the employee elected to use earned compensatory time off for travel instead of using his or her excess annual leave.

A. No. Compensatory time off for travel may be earned by an employee only for time spent in a travel status away from the employee's official duty station when such time is not otherwise compensable. The term "compensable" is defined at 5 CFR 550.1403 to make clear what periods of time are "not otherwise compensable" and thus potentially creditable for the purpose of earning compensatory time off for travel. Time is considered compensable if the time is creditable as hours of work for the purpose of determining a specific pay entitlement (e.g., overtime pay for travel meeting one of the four criteria in 5 CFR 550.112(g)(2)) even when the time may not actually generate additional compensation because of applicable pay limitations (e.g., biweekly premium pay cap). The capped premium pay is considered complete compensation for all hours of work creditable under the premium pay provisions.

In other words, even though an employee may not receive overtime pay for all of his or her travel hours because of the biweekly premium pay cap, all of the travel time is still considered to be compensable under 5 CFR 550.112(g)(2). Under these circumstances, the employee has been compensated fully under the law for all of the travel hours and the employee may not earn compensatory time off for any portion of such travel not generating additional compensation because of the biweekly cap on premium pay.

Q42. May an employee who receives administratively uncontrollable overtime (AUO) pay under 5 U.S.C. 5545(c)(2) earn compensatory time off for travel? View more A. If such employee's travel time is not compensable under 5 CFR 550.112(g) or 5 CFR 551.422, as applicable, and meets the requirements in 5 CFR part 550, subpart N, the employee is eligible to earn compensatory time off for travel for time spent in a travel status.
Q43. If a part-time employee's regularly scheduled tour of duty is Monday through Friday, 8:00 a.m. to 2:30 p.m., and the employee is required to travel on a Friday from 2:30 p.m. to 4:30 p.m., is the employee entitled to earn compensatory time off for travel for those 2 hours? View more A. It depends. If the travel qualifies as compensable hours of work under 5 U.S.C. 5542(b)(2)(B) and 5 CFR 550.112(g)(2)—i.e., the travel involves or is incident to the performance of actual work, is carried out under arduous and unusual conditions, or results from an event which could not be scheduled or controlled administratively—the employee may not be credited with compensatory time off for travel hours. (Such travel time outside a part-time employee's scheduled tour of duty, but not in excess of 8 hours in a day or 40 hours in a week, would be non-overtime hours of work compensated at the employee's rate of basic pay.) If the travel time does not qualify as compensable hours of work and meets the other requirements in 5 CFR part 550, subpart N, the part-time employee would be entitled to earn compensatory time off for those 2 hours. We note travel time is always compensable hours of work if it falls within an employee's regularly scheduled administrative workweek. (See 5 U.S.C. 5542(b)(2)(A) and 5 CFR 550.112(g)(1).) For a part-time employee, the regularly scheduled administrative workweek is defined in 5 CFR 550.103 as the officially prescribed days and hours within an administrative workweek during which the employee was scheduled to work in advance of the workweek. An agency may not adjust the regularly scheduled administrative workweek normally applied to an employee (part-time or full-time) solely for the purpose of including planned travel time otherwise not considered compensable hours of work.
Q44. Does an upgrade in travel accommodations impact an employee's entitlement to compensatory time off for travel? View more A. Allowing an employee to upgrade his or her travel accommodations (e.g., to business class) does not eliminate his or her eligibility to earn compensatory time off for travel.

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Trans-Siberian Railway Prices

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Ticket prices for the Trans-Siberian Railway also depend on the current ruble exchange rate.

Is the Trans-Siberian Railway expensive?

Before starting on your Trans-Siberian Railway adventure you naturally want to know what the entire trip will cost. Although this sounds like a simple question, it is pretty difficult to answer. The Trans-Siberian Railway price of travel depends on the following factors:

Which travel class do I want to use? The price for a first class ticket is about three times the price of a 3rd class ticket
Am I willing to buy the tickets myself and assume responsibility for the organisation of the trip?
How many stopovers do I want to make? The more breaks, the higher the total price.
What sort of accommodation do I want? Will it be a luxury hotel or will a hostel dormitory be sufficient?
What tours and excursions would I like to go on?
What is the current exchange rate for rubles?

Basically, everything from a luxury to a budget holiday is available. If you buy yourself a 3rd Class nonstop ticket at the counter, a few hundred Euros will cover the price. All you will experience is a week on the Trans-Siberian train and will see nothing of the cities on the way. There is, however, any amount of room for upward expansion. Everyone makes different choices about which aspects they are willing to spend money on. I personally prefer to save money on accommodation and railcar class, visit as many cities and do as many trips as possible. To enable better classification of your travel expenses I have contrasted two typical traveler types. In the third column you can calculate the total cost of your own journey on the Trans-Siberian Railway. Please keep in mind that these are only rough estimations and not exact prices.

The all-in costs seem fairly high at first. However, they cover everything and it is quite a long journey taking four weeks. Many people forget to consider that when looking at the list. We should also deduct the running costs for food and leisure at home. I think most visitors to this page will classify themselves somewhere between the two categories, that is around the € 2,000 – € 2,500 range. When comparing these prices with other travel packages, you get the impression that it is hardly worthwhile travelling individually on the Trans-Siberian Railway. Please keep in mind that most packages last no more than 14 days and you are herded like cattle through the most beautiful locations.

If you spend less time on the Trans-Siberian Railway you will, of course, pay less. I chose this particular travel length because I prefer not to do things by halves. If you fulfill your dream of travelling on the Trans-Siberian Railway, enjoy it and don’t rush things. But it’s up to you, of course. Try playing around with the form a bit to find the appropriate price for your trip.

Trans-Siberian Railway Tickets »

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Business travelers should check out these deductions before hitting the road

What to know about tax deductions for business travel

Business travel deductions are available for certain people who travel away from their home or main place of work for business reasons. A taxpayer is traveling away from home if they are away for longer than an ordinary day's work and they need to sleep in a location other than their home to meet the demands of their work while away.

Travel expenses must be ordinary and necessary. They can't be lavish, extravagant or for personal purposes.

Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment is less than one year.

Travel expenses for conventions are deductible if attending them benefits the business. There are special rules for conventions held outside of North America.

Deductible travel expenses include:

Travel by plane, train, bus or car between home and a business destination
Fares for taxis or other types of transportation between an airport or train station and a hotel, or from a hotel to a work location
Shipping of baggage and sample or display material between regular and temporary work locations
Using a personally owned car for business
Lodging and meals
Dry cleaning and laundry
Business calls and communication
Tips paid for services related to any of these expenses
Other similar ordinary and necessary expenses related to the business travel

Taxpayers can find more about the rules for travel deductions with Publication 463, Travel, Gift, and Car Expenses.

Self-employed individuals or farmers with travel deductions

Self-employed people can deduct travel expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) .
Farmers can deduct travel expenses on Schedule F (Form 1040), Profit or Loss From Farming .

Travel deductions for Armed Forces reservists

Members of a reserve component of the Armed Forces of the United States can claim a deduction for unreimbursed travel expenses paid during the performance of their duty. These travel expenses must be for travel more than 100 miles away from their home.

Recordkeeping is important

It's easier to prepare a tax return with organized records . Taxpayers should keep records such as receipts, canceled checks and other documents that support a deduction.

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COMMENTS

Understanding business travel deductions
Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. A taxpayer is traveling away from home if they are away for longer than an ordinary day's work and they need to sleep to meet the demands of their work while away. Travel expenses must be ordinary and necessary.
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Topic no. 511, Business travel expenses
Topic no. 511, Business travel expenses. Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can't deduct expenses that are lavish or extravagant, or that are for personal purposes. You're traveling away from home if your duties require you to be away from the general ...
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Other similar ordinary and necessary expenses related to the business travel; Taxpayers can find more about the rules for travel deductions with Publication 463, Travel, Gift, and Car Expenses. Self-employed individuals or farmers with travel deductions. Self-employed people can deduct travel expenses on Schedule C (Form 1040), Profit or Loss ...

7 Rules You Should Know About Deducting Business Travel Expenses

Charges on Your Hotel Bill

Combined Business/Personal Trips

Frequently Asked Questions (FAQs)

Key Takeaways

What Is Your "Tax Home"?

Using Per Diems To Calculate Employee Travel Costs

The Cost of a Cruise (Within Limits)

How do you write off business travel expenses?

What are standard business travel expenses?

The Bottom Line

Everything You Need to Know About the Business Travel Tax Deduction

What counts as business travel?

What counts as "mostly business"?

Special rules for traveling abroad

What is an “ordinary and necessary” expense?

What is your tax home?

What's your main place of business?

How large is your tax home?

Rules for business travel

1. Your trip should take you away from your home base

2. You should be working regular hours

3. The trip should last less than a year

What about digital nomads?

Requirement #1: A tax home

Requirement #2: Some work-related reason for traveling

The travel expenses you can write off

🛫 All transportation

🥡 Meals while traveling

🌐 Wi-Fi and communications

👔 Dry cleaning

Travel expenses you can't deduct

The cost of bringing your child or spouse

Some hotel bill charges

Where to claim travel expenses when filing your taxes

What happens if your business deductions are disallowed?

When does the penalty come into play?

How much is the penalty?

Deductions For Business Travel Expenses

Related topics

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Travel and subsistence expenses for workers engaged through 'employment intermediaries' from 6 April 2016

How the rules apply from 6 April 2016

Amendments to the legislation

ESM5510 - introduction: the employment intermediaries travel expense provisions

Ordinary commuting and permanent workplaces

Who the changes affect

The changes

Further information

ESM5520 - effect of the employment intermediaries travel expense provisions and definitions

Definitions

ESM5530 - application of the employment intermediaries travel expense provisions: the basic conditions

Ordinary commuting

Modification

ESM5540 - the basic conditions: personally provides services

Excluded services

Example - excluded services

ESM5550 - the basic conditions: type of employment intermediary

Type of employment intermediary

Employment intermediaries within the scope of the intermediaries (IR35) legislation

Businesses that don’t fall into the definition of an ‘employment intermediary’

ESM5560 - supervision, direction or control

Determining if SDC applies

HMRC ’s view

Modification for intermediaries within the scope of IR35 legislation

Special provisions relating to fraudulent documents and transfer of debt provisions

ESM5570 - employment intermediaries within the scope of the managed service companies ( MSCs ) legislation, Chapter 9 ITEPA

Transfer of liability

Example 1 - when the employment intermediary is an MSC - all conditions in section 61B(1) ITEPA are satisfied

Example 2 - when the employment intermediary would be an MSC - section 61B(1)(c) not satisfied

ESM5580 - modified provisions for employment intermediaries within the scope of the intermediaries’ legislation (IR35), Chapter 8 ITEPA

Modification applies and worker is an office-holder of client, or would be an office-holder or employee if engaged directly

Modification applies and worker is not an office-holder of the client and would not be regarded as an office-holder or employee of the client if engaged directly

Transfer of debt provisions

ESM5590 - examples of the application of the employment intermediaries’ travel expense provisions

ESM5600 - impact of the employment intermediaries travel expense provisions on a worker’s own PSC which is not an MSC and examples