Employers use to pay subsistence expenses tax-free to attract the employees and to ease their business tours both domestically & internationally. HMRC benchmark subsistence scale rates used by employers are based on either bespoke scale rate payments specifically agreed with HMRC, or industry-wide scale rates.
Before the recent change in the subsistence law on 6 April 2019, the employees were asked to show the receipts of their actual expenses on the expenses during their business travel. However, it was an administratively daunting task for the employers to check and keep a record of the receipts and then approve the subsistence payment for the expenses occurred.
As of changes announced on 6th April,April 2019, employers need to only evidence that an employee was on a qualifying business trip, without a need for any receipted evidence of the actual expenses occurred.
Currently, there are fixed/benchmark subsistence scale rates that are applied according to the minimum journey hours as mentioned below:
• Maximum £5 for the minimum journey of 5 hours
• Maximum £10 for the minimum journey of 10 hours
• Minimum £25 for the minimum journey of 15 hours or more and is ongoing at 8pm.
• An additional meal allowance not exceeding £10 per day paid if you qualify for option a or b above is paid and the qualifying travel in respect of which that allowance is paid is ongoing at 8pm.
These amounts are paid for the meal expenses of the employees during their journey to somewhere for business purposes. When the employees are offered a specific subsistence rate for their food and drink, they can estimate how much they are saving or have to pay personally. Employers who follow the HMRC benchmark subsistence rates don’t check the expenses receipts from the employees when they get back to the firm, office, or company. These specific rates are tax-free and if a higher amount is paid without getting approved by the HMRC the additional amount will be taxed.
Situations when HMRC subsistence expenses are applied
• The travel of the employee is to a place other than the normal and routine places of business. (i.e travel from office to home as usual)
• During the business working period, the employee must not be present in its workplace where it performs its normal work activities in routine.
• Subsistence expenses will be paid if the food & drink expenses have occurred during the business working period.
Should I follow the benchmark subsistence scale rates rather than reimbursing actual costs?
For most of the employers, it can be the right choice to follow the HMRC’s benchmark subsistence rates. Because they are no longer required to check the receipts as well as to reimburse the actual costs with fully taxed expenses. In this way, the employer also remains safe from the tax surprises at the end of the Tax Period.
A fixed subsistence rate enables the employers to easily determine approximate subsistence expenses according to the time duration period of the job tour. So, if you are thinking about following the HMRC benchmark subsistence rates, you would be more comfortable with a “yes” as an answer.
If the current subsistence rates do not fit your criteria, you can always negotiate a bespoke subsistence scale rate with HMRC to meet your business requirements.
If given the current situation you are working from home, the above wouldn’t apply.