Tax

Travel expense tax refund could help boost economy by £4.5bn a year, research finds

Research by tax refund firm, Rift Refunds, has suggested that refunding the tax paid on commuter travel expenses when the UK returns to work could help boost the economy by as much as £4.5bn in the aftermath of the current pandemic.

Rift Refunds said that unlike self-employed workers who deduct travel expenses as part of their annual self-assessment tax returns, many PAYE MOD and construction operatives like labourers, ground workers and bricklayers are required to claim these expenses back from HMRC each year.

On average, 82.4% of these refunds are travel-based, recouping money spent commuting using their own vehicle or via taxis, ferries, flights or public transport.

The firm said there is already legislation in place that allows others to claim a tax refund for the difference in cost to travel to temporary workplaces. These cover employees who travel to a location only to perform a task of limited duration or for a temporary purpose.

However, with much of the UK struggling financially due to the spread of the coronavirus, RIFT Refunds believe this option to reclaim tax paid on upfront travel expenses should also be offered to the rest of the UK’s 28 million plus commuters regularly travelling by road, bus or rail to their regular workplace for the current tax year, to help reduce outgoings and boost a struggling economy.

With the average commuter spending £796 a year travelling to and from work, the total amount spent on an annual basis is around £22.3bn. However, with the average commuter paying 20% tax on their income, they are required to earn £955 in gross income in order to cover the annual cost of commuting (£796).

Bradley Post, managing director of Rift Refunds, said: “We currently find ourselves in an incredibly difficult position with many businesses at best having to furlough much of their workforce and at worst already entering administration.

“This, of course, has huge implications to the UK’s workforce who are facing months of uncertainty on a lower wage or no wage at all and this financial difficulty will last well beyond the point at which the current lockdown is lifted.”

He added: “When this time does come, many will be once again commuting to their place of work which comes at a considerable cost and one that must be paid upfront.

“However, we believe that extending the ability to reclaim this cost from HMRC for all commuters and not just those that currently qualify, could bring a well needed boost to the UK workforce and economy. Even if only on a temporary basis until greater stability returns.”

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