One of the most frequently asked questions from business owners and employees is ‘how much can I claim for meals and travel?’
Its such a common question that HMRC have a specific notice (490 Employee Travel) which explains the rules with examples
Here are some of the key points:
Section 1.7 Tax Relief
If an employee is obliged to incur travelling in the performance of their duties, provided the journey isn’t ordinary commuting they employee is entitled to tax relief on the full cost of Travel.
Section 3.2 Ordinary Commuting
Ordinary Commuting is travel to/from a permanent place of work, normally from/to home
3.8 excludes Private Travel
3.12 states that Non Exec Directors traveling to the company for board meetings is Ordinary Commuting
Section 3.18 The 24 Month Rule
In summary if you work at temporary place of work for less than 24 months you may be able to get tax relief.
Section 3.36 Employees who work from Home
If an employee performs substantive duties at home, then it may be treated as their place of work.
Where this is the case travel to other work places will be business travel.
Section 5.1 The Amount of Tax Relief
If the trip qualifies as business travel then the full cost will be allowed for relief, you don’t need to try to save money on the cost of the trip!
Section 5.4 Subsistence
Subsistence includes:
- any necessary subsistance in the course of the journey
- the cost of meals at a temporary workplace
- the cost of meals as part of an overnight stay
Section 5.12 Scale of Expenditure
Where the travel is unusually lavish HMRC will consider whether the trip is really a reward or part of remuneration, but this is rare and HMRC will not seek to deny costs because for example you travel first class rather than second class.
Section 8.4 Incidental Expenses
These are £5 in the UK and £10 when overseas per night to cover expenses such as Laundry, Phone Calls and a Newspaper
Section 8.14 Unpaid Directors
Unpaid directors are entitled for relief for any they receive to cover travel
Scale rate payments
If you provide your employees with a set amount of cash for some common business expenses like travel and meals, these are known as ‘scale rate payments’.
As long as your employee has actually spent the scale rate payment on business expenses, you won’t need to check every single receipt – it’s fine to just check a sample.
You can set up a scale rate payment by either:
- agreeing a scale rate with HM Revenue and Customs (HMRC) by providing evidence of typical expenses (eg receipts)
- using HMRC’s benchmark scale rates for subsistence costs
