For UK businesses managing short-term projects, secondments, or contract staff across different locations, providing accommodation and covering travel costs is essential. However, these expenses can quickly become complex, triggering tax and National Insurance Contributions (NICs) for both the company and the employee.
This is where the Temporary Workplace Relief (TWR) becomes your most valuable financial tool. Understanding and properly applying TWR allows employers to provide essential accommodation and travel tax-free, creating significant savings and a more attractive package for staff.
What is Temporary Workplace Relief (TWR)?
TWR is a provision in UK tax law (specifically in the Income Tax (Earnings and Pensions) Act 2003) that allows employers to cover the cost of an employee’s travel, subsistence (food and drink), and accommodation when they are required to work at a location that is not their permanent workplace.
Crucially, when TWR applies, the employer can pay for or reimburse these expenses tax-free and NIC-free. This means:
- For the Employee: The cost of their corporate accommodation (and travel/subsistence) is not treated as a taxable benefit-in-kind.
- For the Employer: The company avoids paying employer’s Class 1A NICs on the value of the benefit.
This is a huge advantage over “ordinary commuting” expenses (home to permanent workplace), which are generally not tax-deductible.
The 24-Month Rule: Defining ‘Temporary’
The entire relief hinges on the definition of a “Temporary Workplace.” HMRC uses a two-part test to determine if a location qualifies. The workplace ceases to be temporary if both of the following conditions are met:
1. The 40% Rule (Significant Extent)
The employee has attended, or is likely to attend, that particular workplace for a period of continuous work where they perform their duties to a “significant extent.” HMRC defines “significant extent” as spending 40% or more of their working time at that location.
2. The 24-Month Rule (Duration)
The period of continuous work (at the 40% or more level) lasts, or is likely to last, more than 24 months.
The Conclusion: If the employee is expected to spend 40% or more of their time at a location for 24 months or less, it is a Temporary Workplace, and TWR applies.
- Example 1: Assignment for 18 months. If the duration is 18 months (and the time spent is ≥40%), the workplace is temporary, and TWR is available.
- Example 2: Assignment for 30 months. If the duration is 30 months (and the time spent is ≥40%), the workplace is permanent from Day 1, and TWR is not available.
- Example 3: Low Attendance. If the duration is indefinite, but the time spent is <40% (e.g., one day a week), the workplace remains temporary, and TWR is available with no 24-month limit.
Maximising the Relief with Serviced Accommodation
Serviced apartments are the perfect match for maximising TWR because they solve all the logistical and compliance problems simultaneously:
1. Simplify Cost Consolidation
A serviced apartment provides a single, all-inclusive invoice for rent, utilities, Wi-Fi, and Council Tax. When you pay this bill directly for an eligible employee, you are covering all the “accommodation costs” allowed under TWR with one clean, auditable payment. Using a professional provider like Housd ensures the invoices are always transparent, making HMRC compliance straightforward.
2. Utilise the Subsistence Element
TWR not only covers the accommodation but also subsistence costs (i.e., meals and other incidental living expenses). The advantage is that serviced apartments come with a fully equipped kitchen, allowing the employee to prepare their own meals. This is often more cost-effective for the employer than paying for daily restaurant meals and is a major comfort factor for the employee.
3. Clear Documentation and Audit Trail
HMRC requires clear evidence. The corporate booking process provides this:
- Assignment Letter: Ensure the employee’s secondment or contract letter clearly states the expected duration of the assignment (e.g., “for a period not exceeding 12 months”) to establish the initial intention for a temporary stay.
- Invoices: Use detailed invoices that itemise the accommodation costs, providing a robust trail should HMRC ever challenge the claim.
4. Managing Changes to the Assignment
The 24-month rule is based on the expectation at the time of the assignment. This is a critical point:
- Start Date: If you initially expect the assignment to last 18 months, TWR applies from Day 1.
- The ‘Stop Date’: If, after 12 months, the assignment is extended, and the new expected total duration exceeds 24 months (e.g., a total of 30 months), the workplace ceases to be temporary from the date the expectation changes. You must stop applying TWR from that new date.
Conclusion: TWR is a Must-Use Tool
Temporary Workplace Relief is one of the most powerful tax reliefs available for companies with a mobile workforce. By ensuring your assignments fall within the 24-month/40% rule and partnering with a reputable serviced accommodation provider like Housd, you can offer your staff premium, comfortable living arrangements while significantly cutting your tax and National Insurance liabilities.
The result? A more compliant finance department and happier, more productive employees. 🚀
Don’t leave money on the table. Contact Housd today to streamline your corporate accommodation bookings and maximise your Temporary Workplace Relief.
