One of the most common travel expense mistakes I see businesses make has nothing to do with the mileage rate or the meal allowance. It’s a much more fundamental error that they haven’t stopped to ask whether the workplace the employee is travelling to qualifies for tax-free treatment in the first place.
That question –of whether the workplace is permanent or temporary sits at the heart of travel expense compliance. Get it right, and the costs your employees incur travelling for work are reimbursable without creating a tax liability. Get it wrong and what looked like a perfectly reasonable expense claim becomes a taxable benefit, with PAYE, National Insurance and potentially penalties to follow.
It’s worth taking the time to understand the rules properly.
Why the destination matters more than the distance
When an employee uses their own vehicle for business travel, you can reimburse them at HMRC’s approved mileage rates – 45p per mile for the first 10,000 business miles in a car, 25p per mile above that – without creating a taxable benefit. Meal allowances can be paid using HMRC’s benchmark scale rates without the need for receipts. Accommodation costs for overnight trips can be covered without a tax charge.
But none of that applies automatically. The travel itself has to qualify, and that means the employee must be travelling to a temporary workplace, not a permanent one.
Travel between home and a permanent workplace is ordinary commuting. It is never tax-free, regardless of how far the employee travels, how inconvenient the journey is, or how the expense policy describes it. Reimbursing it creates a taxable benefit.
What makes a workplace temporary
A workplace is temporary when the employee is not expected to work there for more than 24 months, and does not actually work there for more than 24 months. This is known as the 24-month rule.
Both conditions have to be met. If an employee is assigned to a client site for an expected 18 months, that site is a temporary workplace from the start, and travel costs are allowable throughout. If the assignment runs its course and the employee moves on, the costs were tax-free all along.
This is more generous than many employers realise. Employees working across multiple client sites, spending time at different locations, can typically claim travel to each one, because each site individually qualifies as temporary.
The rule also applies to employees who don’t have a fixed base at all. Where someone’s duties are by their nature carried out at a series of different locations, the travel costs of getting to each one are generally allowable.
The expectation point – where most businesses go wrong
The 24-month rule is straightforward in theory. In practice, it catches businesses out because it depends not just on what actually happened, but on what was expected at any given point.
The moment expectations change is the moment that matters.
Take a practical example.
An employee is sent to a client site on a 12-month contract. Travel costs are allowable from day one as the site is temporary.
At month 10, the contract is extended to 30 months. That extension changes the expectation. From the point at which the extension is agreed, the workplace becomes permanent, and travel costs stop being tax-free.
It doesn’t matter that the employee had been travelling there for 10 months under allowable conditions. It doesn’t matter that the original assignment was genuinely temporary. Once it becomes clear that the employee will be there for more than 24 months in total, the tax treatment changes – and it changes from the point that becomes known, not from month 25.
A 3-year secondment, regardless of how the secondment agreement describes it, is a permanent workplace from day one. There is no grace period and no way to reclassify it.
What this means for mileage and meal allowances
The practical consequences run further than just mileage reimbursement.
HMRC’s benchmark scale rates for meals – £5 for breakfast where travel starts before 6 am, £5 for lunch where travel exceeds five hours, £15 for an evening meal where travel exceeds 10 hours or finishes after 8 pm – are only available when the underlying travel qualifies. Pay those rates to employees travelling to
their permanent workplace, and you haven’t given them a tax-efficient allowance; you’ve created a taxable benefit.
This is a mistake I see regularly. An employer introduces a sensible-looking travel and subsistence policy, applies the HMRC rates, and believes everything is in order. The problem surfaces when someone looks closely at who those payments are being made to and whether they’re making qualifying journeys.
The fix is to make sure your expenses policy explicitly links entitlement to scale rates to temporary workplace travel. If the employee is heading to their regular office, scale rates don’t apply.
Keeping track before the 24 months are up
The 24-month rule creates an ongoing record-keeping obligation that most businesses underestimate.
For any employee whose travel costs you treat as tax-free, you need to know when the assignment started, what the original expected duration was, and whether that expectation has changed. That information isn’t always easy to piece together after the fact – particularly where the employee has been working at a location informally, or where contract extensions have been agreed verbally or through a series of emails rather than a formal process.
A practical approach is to build a review trigger at 18 months for any employee claiming travel to a fixed location. At that point, you have time to assess whether the 24-month threshold is approaching, whether the assignment is likely to be extended, and what the tax implications are if it is.
Where an assignment does move from temporary to permanent, employees need to know that their travel costs will no longer be reimbursed tax-free. Finding out through an unexpected tax bill is not a good outcome for anyone.
The Fair Work Agency changes the enforcement picture
With the Fair Work Agency operational as of April 2026, the environment for expense compliance has changed. The FWA has powers to inspect records, interview employees, and pursue enforcement action for non-compliance across a range of employment obligations, including expenses and benefits.
Informal practices and approximate records that might have gone unchallenged before are now more likely to attract scrutiny. The expectation is that employers can demonstrate clearly, on paper, how their expense treatment was determined and why it was correct.
For travel expenses, that means being able to show the basis on which a workplace was classified as temporary, what records were maintained of expected and actual assignment durations, and at what point, if ever, the position was reviewed.
The question to ask before every travel expense policy review
The simplest way to sense-check your approach is to ask, for each category of travel you reimburse, is the employee travelling to a temporary workplace, or a permanent one?
If it’s temporary and within the 24-month window, the costs are allowable. If it’s permanent, or if you can’t easily answer the question, the expense isn’t tax-free and treating it as such creates a liability.
That’s not a complicated test. But it does require someone to ask it, and to keep asking it as assignments evolve.
If you’re not confident about how your current travel expense policy holds up, or you want to review the classification of specific employee assignments, our consultancy team is happy to help
