Tax free reimbursement of directors and employees expense claims

Formulating, processing, and evidencing expense claims for travel & subsistence costs incurred by directors and employees can be a frustrating burden on any employer’s time. So is there another way of doing things?

The obvious alternative is to reimburse expenses using HMRC’s ‘benchmark’ scale rate payments, thus circumventing the need to collect receipts and then collate all that data.

The current rates that can be paid tax free are:

 

Meals:

Breakfast rate up to £5.00

One meal (5 hour) rate up to £5.00

Two meals (10 hour) rate up to £10.00

Late evening meal rate up to £15.00

 

Additional incidental expenses:

Overnight stay away from home in the UK – £5 per night

Overnight stay away from home and overseas – £10 per night

 

Conditions:

  1. The travel must be ‘qualifying travel’. Essentially that means in the performance of the director/ employee’s duties whilst travelling away on an ‘irregular business trip’, or to a ‘temporary workplace’. Travel to a ‘permanent workplace’ is not qualifying travel.
  2. The employee should have incurred the costs after starting the qualifying travel (and before it ends).
  3. The ‘Breakfast rate’ applies where an employee leaves home earlier than usual and before 6.00 am and buys breakfast during the qualifying travel.
  4. The ‘One meal (5 hour) rate’ applies when the employee has been undertaking qualifying travel for a period of at least 5 hours and has a meal/drink.
  5. The ‘Two meal (10 hour) rate’ applies when the employee has been undertaking qualifying travel for a period of at least 10 hours and has a meal/drink.
  6. The ‘Late evening meal rate’ applies when the employee has to work later than usual, and finishes work after 8.00 pm, then has to buy a meal/drink which he would usually have at home.
  7. ‘Incidental expenses’ covers other un-receipted expenses when away from home on qualifying travel overnight – e.g. taxi fare

NB. You can also pay less than the maximum allowable amounts.

 

It is also possible to agree higher ‘scale’ rates with HMRC if you can prove to HMRC that higher rates are justified. This is normally achieved by carrying out a sampling exercise using actual employee expenditure.

Finally, in rarer instances, the time and trouble involved in basing each claim on actual expenditure may be justifiable, because the law doesn’t stipulate what sort of travel your employees/directors should use. In theory, you could therefore reimburse a director’s private jet hire to business meetings!

To find out more and/or arrange a meeting discuss your requirements in detail please call David Sutton on 0114 266 4432 or email dsutton@suttonmcgrathhartley.co.uk.

David Sutton, Managing Partner at Sutton McGrath Hartley


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