Home to work travel – a reminder about FBT

By Robyn Walker

Since Fringe Benefit Tax (FBT) was established 40 years ago, the workforce has evolved, more employees have started working from home and the types of vehicles being driven have materially changed. Despite this, the FBT rules have remained static. While there are murmurings that the new Government intends to undertake a review of FBT, any potential changes to the treatment of motor vehicles could be years away. With this in mind, Inland Revenue have released draft guidance to ‘remind’ taxpayers of how the current FBT rules apply to travel by motor vehicle between home and work. This guidance updates and refreshes guidance from 2004.

Home to work travel is viewed as being inherently private in nature, the consequence being that (unless a statutory exemption applies, such as the work-related vehicle exemption) any home to work travel prima facie results in a fringe benefit being provided to the employee. The question therefore is, are there situations where home to work travel should not be subject to FBT? Over the years there have been a number of cases which have tested the boundaries resulting in four case law exceptions being established:

1. A vehicle is necessary to transport equipment or instruments that are essential to the employee’s work between the employee’s home and workplace.
2. The employee’s work is itinerant.
3. The employee responds to emergency calls at home and their responsibility for the outcome begins before they leave home.
4. The employee’s home is a workplace (or base of operations). To satisfy this exception, the employee must meet specific criteria. It is not sufficient that work is carried on at home (even if it is a condition of the employee’s employment contract).

Each of these tests is explained at length in the draft statement, with the upshot being that falling into the exemptions is not a simple feat, and they really are the exception rather than the norm. For example:

• Any equipment being transported must require a car because of its bulk or its value, sensitivity or other characteristics making it impractical to transport without a car. So, an employer requiring employees to take laptops or sensitive information home each night as part of a business continuity plan would not be sufficient.

• An itinerant worker needs to use their home as a base of operations and the nature of the job must require travel as an essential part of performing employment duties.

• Employees who need to travel between work and home at nights or weekends to carry out specific tasks are not exempted.

• Choosing to work from home does not affect whether a person’s home is their workplace as personal choice has never been a basis for creating a home workplace.

• To have a home workplace there must be a requirement due to the nature of the work itself to do the work in two (or more) locations.

• There must be sound business reasons for working from home (which apply to all employees in the role), a significant amount of work must be carried out at home, there must be significant storage of business goods or equipment and space set aside, and the activities of the employee at home must be closely integrated with the business.

• An employee taking home a vehicle for security reasons or for charging (in the case of an electric vehicle) will be insufficient to satisfy the case law tests.

A reminder that if the vehicle is available to the employee for private use, then FBT will apply regardless of whether there is a home work place.

With Inland Revenue having a renewed focus on ensuring taxpayers are complying with tax laws, the draft statement is a timely reminder that employers should be checking to ensure FBT rules are being correctly applied to all motor vehicles and that any reliance on exemptions is consistent with Inland Revenue’s guidance. Now could be a good time to undertake an independent review of FBT, for more information please contact your usual Deloitte advisor.