Travel and subsistence expenses are costs that an employee incurs while travelling for business purposes from one place to another. These expenses can include the cost of travelling, meals, accommodation, laundry, and other related expenditures ...
As of April 2019, HMRC no longer requires businesses to provide receipts for every cost incurred as part of a business journey. The employee only needs to prove that they were on a business trip when the expenses were incurred.
However, this rule doesn't apply if an employee uses specially-agreed custom allowance rates or industry-agreed rates. Also, certain costs and expenses are not eligible for reimbursement under travel and subsistence expenses. Unclaimable expenses include daily travelling expenses, and expenses for personal vehicles purchased through loans or capital allowances.
Employees are entitled to tax-free reimbursements for their business travelling. They can either get paid by the employer tax-free or opt for tax relief on any shortfall via their tax return!
HMRC allows the usage of personal vehicles for work-related travelling on fixed amounts. If the employee spends more than the fixed amount, they must pay the exceeding amount themselves. An employee can claim the cost incurred at temporary workplaces, where the employee spends less than 40% of work time or has spent less than two years.
An employee cannot claim the daily expense of travelling from home to the permanent workplace, except in certain circumstances like travelling to different places for work-related purposes or urgent basis.
HMRC has set standard rates for subsistence payments, known as 'scale rates for subsistence expenses'. If the employee claims their expenses as per these rates, their payments will be free from tax and NI contributions.
Employers must pay certain taxes and NI contributions on their reimbursements to employees for their travel and subsistence costs:
- If employees use public transport, employers must report the costs of seasonal tickets and include them in the employee's earnings
- If the employer provides the seasonal ticket, it must be reported on form P11D
- If the employer reimburses the cost of the seasonal ticket, it is counted as earnings, and the employee must pay taxes and Class 1 NI through their payroll
- If an employer provides a loan to the employee for a seasonal ticket, it should be considered as any other loan, and the employer must pay NI and taxes on it
If an employer contributes to providing facilities to employees, they are not obliged to report these amounts to HMRC or pay any tax or NI contributions on them, though I recommend small business owners and entrepreneurs should establish processes with their accountant to file travel and subsistence claims quickly when necessary.
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