(2022)
When are relocation costs recognised despite a small reduction in commuting time?
Recently, the Cologne Tax Court issued a remarkable ruling in favour of taxpayers: Although the required travel time saving of at least 1 hour was not nearly achieved, a move was recognised as work-related and the moving costs as deductible expenses.
Moving costs are tax-deductible as work-related expenses if there are work-related reasons for the move, e.g. change of employer, transfer, taking up or vacating a company flat, etc. A move is also work-related without a change of job if the move reduces the total daily commuting time by at least one hour.
But did you know that a move can still be work-related even if the travel time saving is less than one hour per day? This can indeed be the case if the move leads to an "otherwise significant improvement in working conditions". When might this occur?
In the case in question, before the move, the journey by underground (8 minutes) and the walking times including waiting times took a total of 20 minutes per journey, i.e. 40 minutes per working day. After the move, the workplace was less than a 5-minute walk away. The work-related reason was that the accessibility of the workplace without public transport led to a significant improvement in working conditions (Cologne Tax Court, 24.2.2016, 3 K 3502/13). The reasoning of the Cologne tax judges is very interesting and extremely taxpayer-friendly:
"In assessing whether a move has led to a significant improvement in working conditions despite a time saving of less than one hour, other factors must also be taken into account. For those who do not have to use public transport in a big city and can walk to work, the time pressure and stress of having to arrive on time are eliminated, especially if the employee does not have flexible working hours.
In the case, the teacher also had to carry considerable luggage - books, teaching materials and a laptop - in a rucksack on her journeys, which she could not store at school. As the travel time before her move was mainly spent on walking and waiting at stops or traffic lights, the shortening of the walking time in particular made transporting the heavy luggage much more convenient.
The well-known inconveniences of getting on and off trams with luggage during rush hours were completely eliminated as a result of the move. The fact that the teacher could be scheduled more flexibly in the regular timetable and the substitution plan after the move, or could even come to school for just one hour on her days off, is also part of her working conditions. Whether the school could have demanded this from her beforehand is irrelevant. This does not call into question the work-related reason."
Whether such friendliness will stand up before the Federal Fiscal Court remains to be seen. Another noteworthy aspect: The fact that the move was related to the purchase and occupation of an owner-occupied flat does not, according to the tax judges, prevent the work-related reason for the move. This private motive is overridden by the primary work-related reason.
Are you tired of commuting long distances to work every day and now want to move closer to your workplace? Expenses for looking for a suitable flat, such as advertising costs and viewing trips, can also be claimed as (unsuccessful) moving costs if the search is unsuccessful and the move does not actually take place.
The only requirement is that a daily travel time saving of at least one hour would have resulted if the move had taken place (Düsseldorf Tax Court, 24.3.1994, EFG 1994 p. 652).
