Operand data type time is invalid for add or subtract operators
You should use datetime instead of time, nevertheless it is also possible using your current data:

;with temp
AS
(
    SELECT t.ID,
    CAST(t.Arrival AS time(7)) Arrival,
    CAST(t.Departure AS time(7)) Departure,
    CAST(t.[Break] AS time(7)) [Break],
    DepartureNextDate
    FROM (
        VALUES
        (1, '23:00:00', '01:00:00', '00:00:00', 1),
        (2, '08:00:00', '17:00:00', '01:00:00', 0)
    )t(ID, Arrival, Departure, [Break], DepartureNextDate)

)
SELECT ID, CONVERT(time(7),
    CAST(Departure AS Datetime) 
    + DATEADD(DAY, DepartureNextDate, '') 
    - CAST(Arrival AS Datetime)
    - CAST([Break] AS Datetime)
    )
FROM temp