Parking

Conditions

1. GOV.UK's self-employed expenses guidance lists parking among the car, van and travel costs a sole trader or individual in a business partnership can claim as allowable business expenses. The same guidance lists fines or penalty charges and travel between home and work among the costs you cannot claim.
2. For both sole traders and companies the test is statutory. S34(1)(a) ITTOIA 2005 for unincorporated businesses and S54(1)(a) CTA 2009 for companies allow no deduction, in calculating the profits of a trade, for expenses not incurred wholly and exclusively for the purposes of the trade (BIM37035). HMRC describes this as a two-stage approach: whether the expense is capable in law of satisfying the rule, and whether as a question of fact it was so incurred.
3. Parking on the journey between home and work is not allowable. HMRC states that the cost of travelling between home and work includes the incidental costs of such a journey, including (for example) car parking and congestion charges, and that all such incidental costs are disallowable where the purpose (or one purpose) of the journey is to travel from home to place of work (BIM37605).
4. Where the trade is genuinely itinerant the home-to-work bar can fall away. HMRC states that where an itinerant trader's base of operations is at their residence, you should allow the costs of travelling between the residence and the sites at which the trader works — an itinerant trader being one who travels from their home to a number of different locations for the purely temporary purpose at each such place of their completing a job of work (BIM37620). HMRC also records a qualitative limit on how far such a taxpayer may live from where they normally carry on the trade, and a caution against applying the base of operations test outside the narrow confines of its utility (BIM37620).
5. Using the simplified expenses mileage rate does not absorb parking. HMRC states the mileage rate does not include incidental expenses incurred in connection with a particular journey, such as tolls, congestion charges and parking fees, and that these will be allowable as a deduction where they are incurred solely for business purposes (BIM75005).
6. An employee's deductible travel costs can include parking. HMRC states that travel costs can include other incidental costs that form an integral part of the cost of the business journey, and that this could include toll fees, congestion charges, vehicle hire charges or car parking (EIM31820).
7. An employee gets no deduction for the cost of ordinary commuting. HMRC states that no deduction is due under section 338 ITEPA 2003 for the cost of ordinary commuting, and that the term is defined by section 338(3) ITEPA 2003 to mean travel between a permanent workplace and home, or any other place that is not a workplace (EIM32055). Travel to a temporary workplace is not ordinary commuting, so that cost is deductible (EIM32055).
8. Mileage allowance relief does not displace an employee's parking claim. HMRC lists parking among the things that are not mileage allowance payments, describing it as having nothing to do with mileage at all (EIM31215), states that this kind of expense continues to be covered by the general expenses rules and not by the AMAPs scheme (EIM31335), and permits relief for the actual cost of expenses that would be incurred regardless of the mode of travel, which might include toll fees, congestion charges or car parking (EIM31820).
9. Separately from the deduction rules above, section 237 ITEPA 2003 exempts workplace parking. HMRC states there is no tax charge on a director or employee within the benefits code on the provision of a car or motorcycle parking space at or near his place of work, and that facilities for parking bicycles are also exempt (EIM21685). HMRC states that any payment or reimbursement of expenses in connection with the provision for, or use by, an employee of a car parking space at or near the employee's workplace is not chargeable to tax (EIM01030). These are two distinct rules, each stated on its own source: the commuting rule above governs what an employee may deduct, and this exemption governs whether a tax charge arises on parking the employer provides, pays for or reimburses.
10. HMRC does not apply a rigid approach to "at or near". The words are not defined in the act, and HMRC applies the exemption in any case where parking facilities can be said to be within a reasonable distance from the place of work having regard to the nature of the locality, and does not deny the exemption simply because there is a car park nearer to the place of work (EIM21685).
11. The National Insurance treatment of workplace parking is aligned with the tax treatment. HMRC states there is no Class 1 NIC liability in connection with the provision of car or motor cycle parking spaces or facilities for parking cycles at or near the workplace, no matter what arrangements are made for parking, and that the exclusion applies where the employer provides parking spaces at or near the workplace, provides cash, a credit token or non-cash voucher with which to obtain parking facilities, or reimburses the expenses incurred by the employee in connection with parking at or near the workplace (NIM05625). HMRC states no Class 1A NICs are due in relation to parking arrangements (NIM05625).
12. For parking on business travel, HMRC states there is no liability for NICs on parking fees an employee incurs in connection with business travel, but that the employer must keep a record of individual expenditure in order to confirm the amounts involved in relation to individual employees, and that if the employer only has evidence relating to part of the expenditure NICs will be due on the balance (NIM05620).
13. A fine for breaking the law is not a deductible cost of the trade. HMRC states that a fine incurred as a result of a trader's infraction of the law is not allowable, as it is not incurred wholly and exclusively for the purpose of the trade (BIM42515).
14. Where an employer meets a parking fine that is the employee's own liability, HMRC allows the employer a deduction. HMRC states the fine will be the employee's liability if the penalty notice was actually handed to him or her at the time of the offence, or if the employee owns the car, and that in such circumstances a deduction may be allowed to the employer for the fine paid on behalf of the employee — the employee being taxable on that payment as employment income (BIM42515).
15. The case HMRC treats differently is the employer's own car. Where the notice was fixed to a car owned by the employer, and the employer pays the fine as the registered owner, HMRC states an employment income charge will not arise to the employee and the fine should be disallowed in computing the employer's taxable profit (BIM42515).
16. For the employee, the charge on an employer-paid parking penalty turns on who was liable for it. HMRC states that if the penalty is fixed to a car registered solely in the employer's name and the employer pays the penalty (or reimburses the employee for payment), there are no tax consequences for the employee; and that where the penalty notice is fixed to a car registered in the employee's name and the employer pays the penalty direct to the relevant authority, it discharges a personal debt of the employee and the payment represents earnings chargeable under Section 62 ITEPA 2003 (EIM21686).

Common mistakes

• Trying to claim a parking fine as a business expense. HMRC states a fine incurred as a result of a trader's infraction of the law is not allowable, as it is not incurred wholly and exclusively for the purpose of the trade (BIM42515).
• Claiming parking on the commute. HMRC treats car parking as one of the incidental costs of the home-to-work journey, and disallows those costs where the purpose (or one purpose) of the journey is to travel from home to place of work (BIM37605).
• Assuming the flat-rate mileage deduction already covers parking, and leaving the claim out. HMRC states the mileage rate does not include incidental expenses incurred in connection with a particular journey, such as tolls, congestion charges and parking fees (BIM75005), and for employees parking is outside the AMAPs scheme and continues to be covered by the general expenses rules (EIM31215, EIM31335).
• Reading the workplace parking exemption as a deduction. Section 237 ITEPA 2003 stops a tax charge arising on parking an employer provides, pays for or reimburses at or near the workplace (EIM21685, EIM01030). It does not give an employee a deduction for parking they pay for themselves to attend a permanent workplace, which is the cost of ordinary commuting (EIM32055).
• Treating every employer-paid parking penalty the same way. HMRC's treatment turns on who the notice made liable — whether it was handed to the employee or fixed to the car, and in whose name the car is registered (BIM42515, EIM21686).
• Reporting exempt workplace parking on a P11D. GOV.UK states you do not have to report anything to HMRC, or deduct or pay tax and National Insurance, if the charge was for parking at or near your workplace.

What to keep

• Parking receipts, matched to the business journey they relate to.
• For an employer reimbursing parking on business travel, a record of individual expenditure. HMRC requires this in order to confirm the amounts involved in relation to individual employees, and states that if the employer only has evidence relating to part of the expenditure NICs will be due on the balance (NIM05620).
• A contemporaneous record of business mileage where the simplified expenses mileage rate is used, which HMRC says it is important to maintain to support any claim using the flat rate (BIM75005) — with parking recorded separately, since the rate does not cover it.
• For a parking penalty an employer meets, the penalty notice itself and the registered keeper details for the car, because HMRC's treatment turns on whose liability the notice created (EIM21686).
• Where the trade is itinerant, enough record of the pattern of work to establish the base of operations, which is the question HMRC says to settle (BIM37620).

Real-world example

An IT contractor trading as a sole trader drives from home to a client's office in a city centre, pays to park in a nearby multi-storey, and drives home again. The parking is an allowable expense: GOV.UK lists parking among the car, van and travel costs a sole trader can claim. The contractor uses the simplified expenses mileage rate for the car, and that does not change the answer — HMRC states the mileage rate does not include incidental expenses incurred in connection with a particular journey, such as tolls, congestion charges and parking fees, and that these will be allowable as a deduction where they are incurred solely for business purposes (BIM75005). On a different day the contractor parks in the same multi-storey to work at the coworking space they rent as their business base. That cost is not allowable, because HMRC treats car parking as an incidental cost of the home-to-work journey and disallows it where the purpose (or one purpose) of the journey is to travel from home to place of work (BIM37605). Returning to the car on the client day, the contractor finds a penalty notice for overstaying. That is not allowable either: HMRC states a fine incurred as a result of a trader's infraction of the law is not allowable, as it is not incurred wholly and exclusively for the purpose of the trade (BIM42515). Had the contractor instead been an employee of their own limited company, with the notice fixed to a car owned by the company and the company paying it as registered owner, HMRC states an employment income charge will not arise to the employee and the fine should be disallowed in computing the employer's taxable profit (BIM42515).

Frequently asked

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