Travel and subsistence

Recap

The new HMRC exemption introduced in April 2016 confirmed that businesses will not have to pay tax and NIC on paid or reimbursed travel and subsistence expenses payments or put them on a P11D. In other words, the introduction of the new exemption places the onus on employers to determine whether employee expenses are fully deductible for tax purposes.

Conditions

An employer should consider:-

• setting out a corporate policy of which type of expenses are reimbursable and the need for those expenses to be reasonable
• requiring the completion of a standard expense claim form
• the need for any expense claim to be supported by a receipt
• making checks and authorising expense claims

The employer should also consider scale rates

Scale rates can be used instead of actual expenses and are generally for travel and subsistence and consist of round sum allowable amounts for specific circumstances.

Benchmark rates

Benchmark rates are a set of maximum reimbursement rates for meals. These round sum amounts have now been included in Regulations and can be used by employers for payment or reimbursement of employees expenses where relevant qualifying conditions are met. These rates apply only if the employee incurs expenditure in the course of ‘qualifying business travel’. One meal allowance per day and the amount of which does not exceed:-

• Up to £5 can be claimed where the director/employee leaves home earlier than usual (and before 6am) and has incurred the cost of breakfast taken away from home (irregular early starters only)
• Up to £5 may be claimed every day, where the director/employee has been away from home for a period of at least five hours and has incurred the cost of a meal
• Up to £10 may be claimed every day, where the director/employee has been away from home for a period of at least ten hours and has incurred the cost of several meals.
• Up to £15 may be claimed every day, where the director/employee has to work later than usual (finishing work after 8pm having worked a normal day), and therefore is assumed to have needed to buy a meal (irregular late finishers only)

Conditions for using benchmark rates

Employers must have a checking system in place if benchmark rates are used to ensure that the employee is incurring and paying amounts in respect of expenses of the same kind and that tax relief would be allowed.

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