ECH18015 - Working Rule Agreements (WRA): New Rules for Site Based Employees
There is a belief that the revisions made in 1998 to the
rules on employee travel and subsistence expenses, changed the
circumstances in which allowances could be paid tax free under the
terms of a WRA.
This is not the case. Employers who operate a WRA for
travel/subsistence purposes must do so under the strict terms of
the WRA, and they must operate the WRA for both the travelling and
subsistence elements rather than for one or the other. Employers
are not allowed to operate a WRA and the S337 / S338ITEPA 2003
travel rules simultaneously for their site- based employees. If the
employer wishes to change from one system to another it is best
accomplished by agreement with HMRC at the beginning of a tax year.
The changes introduced in 1998 to the rules in S337/S338 mean
in most circumstances it is in the employee’s interests to
seek a deduction under S337/S338, rather than to rely on tax free
allowances paid under a WRA, as the WRA rates are often set at
rates lower than the level of likely expenditure. For example, an
overnight subsistence rate of £30 payable under a WRA is
likely to be less than the actual expenditure incurred in many
parts of the country. Consequently employers and employees may wish
to give up using WRAs to pay travel and subsistence allowances in
favour of the statutory rules under S337/S338. This change of
practice should be positively encouraged by HMRC.
Following the changes made to the rules in 1998 the
employee
- may be entitled to relief of the full cost of the business travel and subsistence, and
- can make a claim under S337 / S338 ITEPA 2003 for further expenses incurred over and above those already paid out under the terms of the WRA.
If an employer makes payment of expenses outside the framework of the WRA the CIO should seek to recover the tax and NIC on the excess paid above the WRA.
