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In terms of tax planning, you need to make sure you get your business expenses spot-on – and this includes travel and subsistence expenses. 

At the end of the day, we all spend money on meals and beverages, don’t we? 

Thus, it’s a topic a lot of employees aren’t too sure about. For example, what does subsistence mean exactly?

In this guide, we’ll explain all about subsistence expenses, so you can find out everything you need to know.

Subsistence expenses: what’s the meaning?

Essentially, ‘subsistence’ includes food and other fundamental travel costs, including congestion charges, business phone calls, tolls, and parking fees.

Whether you’re buying lunch for a customer or a meal for yourself, all of it falls under the subsistence umbrella.

The UK government has imposed some conditions to adhere to for travel & subsistence expenses

If you’re an employer and pay your workers’ travel costs, then you’re obliged by law to follow specific National Insurance, tax, and reporting responsibilities, including:

  • Compensating travel
  • Offering travel
  • Meals and other ‘subsistence’ when travelling
  • Accommodation (if an employee requires an overnight stay)

Business travel & subsistence expenses

As a business owner, you must let HMRC know about all your staff travel expenses, except – of course – if there’s a reason they’re exempt. You may need to pay National Insurance or tax on it. 

Several business travel expenses are protected by exemptions. In these cases, there’ll be no need to record them in your end-of-year reports. 

You’ll need to document the cost on the P11D form if you don’t have an exemption, but you won’t need to pay or deduct National Insurance or tax. 

In the case of reimbursing your member of staff with more than the required fees of their business travel, the additional amount is considered as earnings. In which case, you’ll need to:

  • Include it in your worker’s ‘other earnings’
  • Pay and deduct Class 1 National Insurance and PAYE tax via payroll

Claiming travel expenses 

Trips between a worker’s property and the office aren’t related to business travel – in which case, they’re deemed ‘private’ travel.

If you pay for and organise transport, you’ll need to:

  • Record the fee on the P11D form
  • Foot the bill for Class 1A National Insurance on the benefit’s value

If your worker organises transport and you pay the supplier directly, make sure you:

  • Record the fee on the P11D form
  • Insert the transport cost to your worker’s other earnings and deduct Class 1 National Insurance via payroll

Exceptions

If the cost is for any of the below, you won’t be liable for paying or reporting anything:

  • A physically impaired worker (this applies in certain situations)
  • A works bus service
  • Taking a taxi home following a one-off, sporadic late-night in the office
  • Calling a cab home if you can’t get a car-share 
  • Driving to the office due to a travel disruption caused by industrial action
  • Cycle or bicycle safety equipment

What are the existing HMRC travel expenses rates?

A company can either choose to reimburse a worker completely – including subsistence costs – or follow the HMRC ‘standard rates’. These limit an employee to three meals across 24 hours.

If an employer uses HMRC’s subsistence rates, they’ll need to fill in a Form P11Dx in advance. According to HMRC guidance EIM05231, the rates are:

  • £5 for breakfast 
  • £5 for one meal (five-hour) 
  • £10 for two meals (10-hour) 
  • £15 for a late evening meal 

These are HMRC’s current guidelines and rules, as per its website. 

That said, we know numerous situations can affect your capability to request an allowance or require that you pay National Insurance or tax on the expenditures. 

Get advice on travel & subsistence expenses

Above is a summary of HMRC’s rules on paying subsistence expenses. If you’d like professional advice on subsistence expenses, get in touch with one of our expert accountants today. 

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