Romford Essex Accountants Blog: Claiming Subsistence On UK Business Journeys

In our earlier blogs, Benefits In Kind - Travel - The Basic Rules and Benefits In Kind - Travel - The 24 Month Rule , we discussed whether you could claim travelling expenses. In this blog, we discuss whether you can claim subsistence expenses as well.

The cost of business travel includes the cost of any necessary subsistence costs incurred in the course of the journey and the cost of meals necessarily purchased whilst at a temporary workplace.

Meal costs should be supported by the meal receipt to avoid problems in making the claim.

Currently, employers must notify HMRC of all expenses they pay to their employees, on the Form P11D unless they have a dispensation.

Obtaining a dispensation?

A dispensation may be granted to employers to help them cut down on the amount of administration they have to undertake to process expense claims

With regards to subsistence expenses, the employers can pay their employees an agreed rate for certain expenses, without having to report each incidence of the expense to HMRC.

Effectively, employers have three methods for paying subsistence expenses to their employees:-

• Pay employees the actual cost based on actual receipted expenses’;
• Obtain a dispensation and either:-
  • Operate the HMRC’s benchmark scale rates;
  • Agree a particular rate with HMRC. Obviously, the employer would only do this if it wants to pay its employees at a rate greater than HMRC’s benchmark scale rates. To obtain this rate, employers will have to undertake a sampling process to show that such rates are in line with what its employees actually spend on subsistence expenses.

If the employer has an existing dispensation in place, then they remain valid until they're reviewed by HMRC, normally every five years.

Once a dispensation comes up for review, the employer can either use the new benchmark scale rates, or continue to use a tailored rate.

However, the employer will need to go through the sampling process once again before being granted a new dispensation.

Benchmark Scale Rates

Benchmark scale rates must only be used where ALL of the conditions are met:

• the travel must be in the performance of an employee’s duties or to a temporary place of work;
• the employee should be absent from his normal place of work or home for a continuous period in excess of five hours or ten hours;
• the employee should have incurred a cost on a meal (food and drink) AFTER starting the journey.

The benchmark scales rates are currently:-

A meal follows the standard dictionary meaning and includes a combination of food and drink.

The scale rate payments are limited to three meals in any 24 hour period.

The breakfast and late evening meal rates can only applied in exceptional circumstances. If the employee has a work pattern whereby he regularly starts early and works late then that employee cannot be given the breakfast and late evening meal rates. HMRC have given guidance on what constitutes regular early or late working patterns in their Employment Income Manual Section EIM05232.

Employees, who regularly starts early or works late, can still obtain the over 5 hour and 10 hour rates, as long as the journey meets the qualifying conditions.

WORD OF WARNING!!!

Employees should only claim for expenses that they have actually incurred whilst on a qualifying journey.

In particular, contractors working under umbrella companies are being encouraged to claim the maximum amount available even if they did not incur the expense in the first place.

The employee could suffer a sizeable tax bill for not applying the rules properly!

If you have any question concerning this blog then contact us here at Trueman Brown Chartered Accountants.