Per diem meal expenses
By now, you’re well aware that per diem payments are for lodging, meals, and incidental expenses while traveling away for business purposes. With 1.3 million people traveling for work every day in the U.S. alone, making sure you know all there is to know is essential for cost-saving.
Throughout this guide, we’ve explained the ins and outs of per diem payments in the UK and the United States. When it comes to meal expenses, the two vary greatly in how per diem payments are handled, including employee reimbursement, meal costs, foreign areas you’re traveling to and from, and more.
Per diem for meal expenses in the UK
The benchmark rate for per diem payments in the UK is as follows:
- £5 for qualifying travel of 5 hours or more
- £10 for qualifying travel of 10 hours or more
- £25 for qualifying travel of 15 hours or more and where the travel is ongoing after 8pm
An additional meal allowance not exceeding £10 per day may be paid if an allowance under 1. or 2. is paid, and travel is ongoing at 8pm.
This covers meals, but it doesn’t cover other costs such as accommodation—you’ll need to arrange a lodging rate if there’s an overnight stay involved.
Use the benchmark rate for quick and easy tax-deductible allowances. If these don’t suffice, you can also agree on a bespoke rate with HMRC. However, this involves past receipts and expense reports.
The bespoke rate form is an online form and will require you to have business information on hand—such as PAYE information and business address.
To agree on a bespoke rate, you’ll have to show HMRC that your travel expenses are typically higher than allowed. You’ll also need to provide proof. Once a bespoke rate is agreed upon, employees can continue to use it without having to reapply every time.
As per the travel regulations Finance Act of 2019, employees needn’t compile expense reports if expenses don’t exceed the benchmark rates. If the rate is bespoke, a regime of verifying and checking receipts must be put in place. For the specifics, head to the HMRC guidelines on checking systems.
Per diem for meal expenses in the U.S.
In the continental United States (CONUS), the General Services Administration (GSA) establishes per diem rates. They separate rates into ‘lodging’ and ‘meals and incidental expenses (M&IE) and, unlike in the UK, have benchmark rates for both.
Per diem rates for non-foreign, non-contiguous U.S. areas, such as Hawaii and Alaska, are established by the Department of Defense Per Diem, Travel and Transportation Allowance Committee (PDTATAC).
Employers have two options when it comes to per diem allowances:
- High-low method: locations deemed ‘high-cost’ are assigned a per diem rate, with all other states taking the ‘low-cost’ rate.
- Standard rates: these are different rates for each state and individual location.
If you’re using the high-low method, the rates are revised yearly. They currently stand as follows:
- High-cost: the full rate is $292, with $71 of that being for meals and incidental expenses
- Low-cost: the full rate is $198, with $60 of that being for meals and incidental expenses
The list of high-cost localities is updated yearly—the full list is here. These are some of the newly added locations that qualify for the ‘high-cost’ rate:
- Los Angeles, California
- San Diego, California
- Gulf Breeze, Florida
- Kennebunk/Kittery/Sanford, Maine
- Virginia Beach, Virginia
Some locations’ ‘high-cost’ status is also seasonal—they’re only considered ‘high-cost’ for certain parts of the year. These seasonal locations include:
- Sedona, Arizona
- Boston/Cambridge, Massachusetts
- Santa Barbara, California
- Naples, Florida
All locations not on the list are considered to be ‘low-cost’ areas and take the ‘low-cost’ rate. The same goes for the seasonal ‘high-cost’ areas—they revert to ‘low-cost’ areas for parts of the year.
Meal expense per diems are one of the two rates—pretty simple.
The other option U.S. employers have is to use the standard rate method for per diem allowances. These are determined by the GSA on a yearly basis, and provide individual lodging and M&IE rates for locations all over the continental United States.
To find your specific destination, you can look it up on the GSA website. Expenses are separated into lodging and M&IE, and are presented on easy-to-read tables.
For example, a quick search for Albany, New York shows that the meals and incidental expenses rate is $61. It then breaks this figure down into a per diem allowance for breakfast, lunch, dinner, and incidental expenses. Per diem incidental expenses allowances are capped at $5, regardless of location.
Plus, you’re able to search by state—this brings up all the available per diem rates in that state. The per diem allowance available varies depending on the standard business expenses associated with traveling to that area.
Here are some quick shortcuts to popular business travel destinations in the U.S.:
- NYC, New York
- Chicago, Illinois
- Phoenix, Arizona
- San Francisco, California
- Seattle, Washington
- Dallas, Texas
- San Diego, California
- Washington D.C, District of Columbia
- Miami, Florida
- Atlanta, Georgia
- Boston, Massachusetts
Again, these are updated yearly to remain adequate for current economies.
Good to know: On the first and last day of travel of the business trip, employers only provide 75% of the per diem allowance. This is calculated on the per diem page of each location.
Employees must keep receipts and details like dates and times in order to submit an expense report to the Internal Revenue Service (IRS). This is necessary in the continental U.S. regardless of whether employees use the standard rates or the ‘high-low’ substantiation method.
Keeping up with changing per diem allowances is a task in itself, but knowing where to go to find the information you need is essential for corporate business travel. Here’s a quick recap of where to go to find the per diem rates for your desired destination.
- Go to the HMRC website for all the information on current per diem rates.
- There you’ll find the online form to apply for a bespoke meals rate or lodging rate.
- Make sure employees are using their per diem rate correctly by introducing checking systems.
- Go to the GSA website to search for your location if you plan to use the standard per diem method.
- Find the ‘high-cost’ locations here if you plan to use the ‘high-low’ substantiation method.
Per diem allowances for meal expenses can be spent wherever the employee desires; however, it shouldn’t exceed the per diem allowance. If a per diem rate goes over the standard or agreed amount it’s considered a taxable benefit to employees, so make sure your employees adhere to the rates.
Now you’re up-to-date with per diem allowances for business meals and incidental expenses, you can rest easy knowing your business travel complies with government guidelines.