For income tax, HMRC treats a geographical area as one big permanent workplace when an employee’s duties are formally tied to that area, they’ve no single base, and they work there regularly. Get that call right, and your mobile staff’s mileage stays tax-free. Get it wrong, and you’re looking at back tax, NIC and an awkward chat with HMRC.
The problem ocoems with roles such as Relief managers, field engineers, care workers and regional reps don’t sit at one desk. They roam. So where does their commute end and their business travel begin? HMRC’s answer lives in a handful of pages in its Employment Income Manual (the EIM), and we’ve read them so you don’t have to.
Why the area matters at all
Tax relief on travel turns on 1 question: is the journey ordinary commuting, or business travel? Section 338 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) gives relief for travel needed to attend a workplace, but blocks it for ordinary commuting. That’s the trip between home and a permanent workplace (EIM32055).
Under section 339(2), a permanent workplace is somewhere an employee attends regularly to do their job. A temporary workplace (one they visit for a task of limited duration or a temporary purpose) isn’t, so travel there qualifies for relief (EIM32065).
Most people have an office, so this is easy. But EIM32065 flags the twist: in some cases a geographical area, rather than a single building, is treated as the permanent workplace. That’s the area rule, and it’s where things get interesting.
The legal test: section 339(8) and EIM32190
The area rule sits in section 339(8) ITEPA 2003, and HMRC’s core guidance is EIM32190. It says the whole geographical area is the employee’s permanent workplace only if all 4 conditions are met:
- The employee has no single place that’s their permanent workplace.
- They attend the area regularly.
- Their duties are defined by reference to that area (unpacked in EIM32191).
- If the area were treated as a workplace, it would be a permanent one.
All 4 means all 4. Miss one and the area rule falls away, and you’re back to judging each place visited as permanent or temporary. EIM32190 also tells inspectors to check the other temporary workplace tests in EIM32075, including the 24-month rule.
So what counts as an area?
HMRC doesn’t set a size limit. An area is whatever the employee’s duties are formally defined by, and that can be a few towns or a whole country. The deciding factor is paperwork, not postcodes.
EIM32191 is the key page here. HMRC says spending most of your time in one patch isn’t enough. That might be personal choice, or your clients might just happen to cluster there. Neither counts.
Instead, there must be evidence the duties are defined by reference to the area. HMRC points to 3 places to look:
- the contract of employment
- the terms and conditions of service
- the letter of engagement
There’s 1 more route. If the employer itself has a set area of responsibility (HMRC’s example is a police authority), the employee’s duties can be defined by the employer’s area.
HMRC’s worked examples show how far the idea stretches:
| EIM page | The employee | Area rule applies? | Why |
| EIM32201 | Relief manager covering a chain of regional tourist board offices, no regular pattern | Yes | No office is permanent, and duties are defined by the region |
| EIM32207 | Utility worker living in Perth, no office, duties cover all of Scotland | Yes | The whole of Scotland is her permanent workplace |
| EIM32202 | Social worker with an area, but an office she attends regularly | No | Fails condition 1: the office is a permanent workplace |
| EIM32203 | Land agent, contract covers Lancashire, works a fixed office each weekday | No | Fails condition 1: all 5 offices are permanent workplaces |
The Scotland example is the eye-opener. A single area can cover tens of thousands of square miles, as long as the contract says so.
Where the commute stops and business travel starts
Once the area rule applies, the boundary line is everything. EIM32200 sets it out: if the employee lives outside the area, the trip from home to the edge of the area is ordinary commuting, with no relief. Inside the line, business travel gets full relief.
| Journey | Tax position (EIM32200) |
| Home (outside the area) to the area’s edge | Ordinary commuting, no relief |
| Business travel within the area | Full relief |
| Between the area and workplaces outside it | Full relief |
HMRC walks through the home-to-boundary split in examples EIM32205 and EIM32206. Relief also covers the subsistence and accommodation tied to qualifying trips, so the Scottish utility worker in EIM32207 can claim meals and hotels on a London visit too.
What about the odd day outside the patch? EIM32195 confirms that occasionally working outside the area doesn’t stop it being a permanent workplace (see example EIM32204).
The traps we see most
A regular base wipes out the rule. If staff turn up at an office or depot regularly, that’s their permanent workplace and condition 1 fails. That’s exactly what sinks the social worker in EIM32202 and the land agent in EIM32203.
Habit isn’t a contract. Working mostly in the North West because that’s where the customers are doesn’t make the North West an area. EIM32191 wants it written down.
The rule can cut relief, as well as grant it. Without an area, each site a roaming worker visits might be a temporary workplace, with relief from the front door. With an area, the drive to the boundary becomes ordinary commuting. Draw the area too big and staff who live outside it lose out.
Area-based and site-based workers aren’t the same. Construction and similar workers moving between sites follow their own guidance in EIM32132, EIM32133 and EIM32134, alongside the 24-month rule in EIM32075. Employers who can’t say which camp their people sit in leave them exposed if HMRC opens an enquiry.
NIC follows the same logic. HMRC’s National Insurance Manual at NIM06330 points straight back to EIM32190, so a wrong call costs Class 1 NIC as well as income tax.
Your 5-minute area check
Run every mobile role past these questions before you set up mileage or expense policies:
- Does the contract, terms and conditions or engagement letter name a defined area?
- Does the employee have no office, depot or base they attend regularly?
- Do they work in the area regularly, with only occasional trips outside it?
- Does the area’s size make sense for where your people actually live?
- Have you recorded whether each role is area-based, site-based or office-based?
5 ticks and the area rule probably applies. Anything less, and each workplace needs judging on its own facts under EIM32065 and EIM32075.
Payroll that gets this right doesn’t happen by accident. At Ascend, our payroll pros check how your people actually work, so expenses are set up properly from day 1, and HMRC enquiries stay a footnote. Want a second pair of eyes on your mobile workforce? Get in touch with the Ascend team.
