Guide to HMRC subsistence allowance & expenses
In the UK, HM Revenue and Customs (HMRC) allows you to claim business expenses under the term “subsistence allowance.” But what is included in a subsistence allowance? What is not? And how can you claim it?
What is a subsistence allowance?
Subsistence is defined as the act of sustaining yourself, particularly at a basic level. So in other words, the basic stuff you need to get through your day. For the purpose of business expenses, it’s also known as a per diem or meal allowance – the inexpensive costs that you need while out on the road; food, drink, that sort of stuff. Admin professionals who manage business expenses, know that these rates can vary depending on the employee’s seniority and location of travel.
These expenses matter because if they’re designated as a business cost, then businesses do not have to pay tax on them, and that means savings! You are able to claim back any VAT spent on these.
How does the HMRC subsistence allowance work?
Fortunately, HMRC’s subsistence allowance guidelines account for more than just meals. It also includes parking charges, tolls, congestion charges, and (business-related) phone calls. HMRC sets conditions and standard rates which you can claim back any tax spent on these. When looking for this online you will see HMRC call this “scale rate payments”.
The main stipulations required to claim meal expenses are:
- The cost of food or drink must be incurred after the business trip has started
- The trip must be outwith their usual commute and be done as part of their job.
- The journey must take the employee away from their usual place of work for 5 hours or more.
As of April 2019, HMRC no longer requires businesses to provide receipts for every cost incurred as part of a business journey. This means a lot less paperwork for business owners and finance teams. Now businesses can claim a set amount for each day of travel and only need to demonstrate that an employee has incurred some kind of expense during their business trip. So, if an employee on a business trip eats three meals, they actually only need to provide proof (a receipt) for one of those meals.
What are the HMRC domestic subsistence allowance rates?
HMRC updates the exact amounts that can be claimed as part of subsistence allowance every year, so make sure to check the official HMRC website to ensure that you have the latest up-to-date information. As of April 7th, 2019 the official HMRC meal allowance rates for UK business travel are:
- £5 for travel of 5 hours or more
- £10 for travel of 10 hours or more
- £25 for travel of 15 hours or more, or if the travel is ongoing after 8pm.
Many companies will have higher per diem rates for C-level executives or just a more generous travel budget. However, If these rates are exceeded, tax is due on the excess.
Need help with employees reporting expenses? Check out our expense form template.
If you or your employees are traveling a lot and regularly go over these amounts, then it’s a good idea to contact HMRC directly and negotiate an allowance specific to your business. For technical information on scale of expenditure, visit the HMRC’s online resource, where they provide examples of acceptable claims.
What about mileage? How much can you claim for driving for business reasons? Good question, check out our Mileage Allowance UK article for the answer.
Important Note: The above rates are ONLY for travel within the UK, for business trips made outside the UK the rates differ.
Overnight accommodation rate UK
The UK government has no agreed benchmark for overnight accommodation expenses, unlike its international rates below. If this is a recurring cost for your business you will need to establish an agreed rate with HMRC. See the HMRC page on bespoke agreements for more information.
Meal allowance rates overseas
For UK. based companies. HMRC has a full list of recommended allowance rates by country. Here we have provided you with the meal allowance rates for some of the most common business destinations:
United States: (USD)
|New York City||31.00||76.50||102.50||216.00|
Hong Kong (HKD)
In addition, the HMRC provides excellent examples of how to use its published scale rates for overseas to reimburse employees and report on spend.
How does a business report subsistence allowance spend?
You do this in the same way you report all of your spending to HMRC. Usually, that means, at the end of the tax year a business submits a P11D form direct to HMRC, for each employee that was subject to expenses/per diem/ meal allowance. Good to keep in mind, you may also need to submit an additional form called P11D(b).
A full guide to expense and benefits reporting can be found on HMRC’s website.
It’s important to have employees submit expense reports on a regular basis or after every trip for subsistence expenses. Given the wide definition applied to subsistence expenses, it is important to keep an eye out for false claims, exaggerated costs, or other cases of expense fraud.