Last month I explained about business expenses that could be claimed back for self employed individuals. This month I look at business expenses from a company perspective, including those employee travel and subsistence business expenses that are allowable for tax reasons. The rules for companies are worded slightly differently in that employees expenses must be “wholly, exclusively and necessarily incurred in the performance of their duties”. The inclusion of the word “necessarily” does lead to some different rules which are explained below.
Travel expenses and the workplace
Travel expenses of an employee are allowable expenses, but not travel to and from their permanent place of work.
What is a permanent place of work? We touched on this last month but it is probably something that needs to be looked at in more detail. A permanent place of work is a workplace that an employee attends to carry out the performance of his duties and is not temporary (back to this in a minute). An employee can have more than one permanent workplace, they do not have to be there all week and it can be defined as an area rather than one workplace (e.g. A sales area manager covering the South East region).
What is a temporary workplace? For HMRC purposes a temporary workplace is where an employee is assigned to a workplace for less than 24 months. However if working for a contract (or fixed term appointment) which is less than 24 months and travelling to the same place for the period of the contract this is still considered permanent. If an employer is unsure whether a workplace is permanent or temporary it is best to check with HMRC.
Mileage Allowance Relief
If an employee uses his own car for business travel then HMRC allow 45p per mile for the first 10,000 miles in a year and 25p per mile over 10,000 miles. This covers expenses such as fuel, repairs, insurance, etc.
For motorbikes the allowance is 24p per mile and for bicycles it is 20p per mile.
HMRC have produced benchmark scale rates for employee subsistence expenses incurred as a result of performing their duties. I have listed them below for your reference :
Breakfast rate £5
May be paid where an employee leaves home earlier than usual and before 6.00 am and incurs a cost on breakfast taken away from his home after the journey has started. If an employee usually leaves before 6.00 am the breakfast rate does not apply.
One meal (5 hour) rate £5
May be paid where the employee has been undertaking qualifying travel for a period of at least 5 hours and has incurred the cost of a meal.
Two meal (10 hour) rate £10
May be paid where the employee has been undertaking qualifying travel for a period of at least 10 hours and has incurred the cost of a meal or meals.
Late evening meal rate £15
May be paid where the employee has to work later than usual, finishes work after 8.00 pm having worked his normal day and has to buy a meal before the qualifying journey ends which he would usually have at home.
Any expenses above these rates paid to the employee are taxable and liable to National Insurance Contributions.
A benchmark rate has not been set for overnight stays or staying with friends and family and has to be agreed with the employer.
If you have any queries about this or any other accounting issues or want any further information do feel free to contact me :
or visit my website
Next month I will be looking at expenses for working from home and childcare costs. In the meantime have a great month and enjoy the World Cup.