Employee travel and subsistence expenses

  • by Carole Jordan
  • 17 Jun, 2016

From April 6th 2016 taxation of employee expenses changed!
Find out how this will affect your business below.

Changes to travel and subsistence expenses

If your employees’ expenses are valid business expenses then they are now tax and NI exempt. This means that you will no longer need to declare them on your P11D 2016/17. This new exemption also applies to subsistence allowances but it has a limit on it.

Keeping things simple

For small businesses the subsistence allowance (meal allowance) approved by HMRC for employees is likely to be the most attractive way of dealing with travel expenses:

One meal allowance per day, in one instance of qualifying travel:

  1. £5 if the duration of travel is 5 hours or more;
  2. £10 if the duration of travel is 10 hours or more; or
  3. £25 if the duration of travel is 15 hours of more, and goes on past 8pm

Employees are entitled to an additional meal allowance per day, not exceeding £10, if their qualifying travel falls under 1 or 2 and their travel goes on past 8pm.

Setting your own special rate for subsistence allowance

As an employer you can choose whether to adhere to this subsistence allowance or set your own special rates. If you already have your own rates in place, and these were agreed post April 6th 2011, then they can remain in place. However, if you would like to follow your own rates in future and do not currently have any then you will have to get them approved by HMRC first.

In order to agree a special rate you must show that the rate you have chosen is a valid estimate of the actual costs your employees incur, by undertaking a research exercise. You must also ensure you make appropriate checks to prove that you only pay expenses where they are due. By completing this exercise you are allowing HMRC to determine what a reasonable subsistence rate would be within your business. For more guidance on how to set your own subsistence rate see the HMRC Employment Income Manual (EIM30250).

Ensure your employees keep their receipts! This allows you to prove that an expense has occurred. Mileage records should always be kept when journeying for business , together with some details about where you were going and why, this is to prove that it was a business related trip.

If you need some additional help understanding these changes, or more advice on how you will be effected, please call us on: 01273 882200, or email us at: info@businessheads.co.uk .

All details above were correct at the time of publishing - for more up to date information please get in touch .

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