Guide to business travel and subsistence expenses

Business travel and subsistence expenses

When your employees travel away for business purposes, it can be costly, especially when accommodation and food are involved. If you choose to cover the cost of your employees’ business travel, then you will have specific tax and National Insurance obligations to adhere to. But did you know that as a business owner or self-employed individual, you can claim tax relief when covering these costs?

Travel and subsistence expenses are the costs associated with business-related journeys, such as transportation, meals, accommodation and other miscellaneous expenses. Effective management of business travel expenses is crucial to the overall financial success of your business.

Read our in-depth guide below to find out all you need to know about business travel expenses for you and your employees and what can be claimed as legitimate business expenses.

At Spotlight Accounting, we are helping you manage your own and your employees’ travel costs so you can stay as tax-efficient as possible. We’ll guide you through the business costs of work-related travel and how you can make tax deductions on these costs.

If you are looking for professional business and accounting support, then please get in touch with our experts today!

What is classified as a business travel expense?

Business travel expenses cover a range of costs incurred while you or your employees are away for business-related purposes. This means travelling from the regular place of work, such as the office, to another location, either a temporary workplace, to meet with clients or participate in business events.

These costs can include:

  • Certain travel expenses, such as train or plane tickets
  • Accommodation costs when an employee stays overnight
  • Food and drink
  • Other necessary costs directly related to business travel

Unfortunately, you cannot claim expenses for employees’ everyday trips to and from their permanent workplace, parking fines, or any non-business-related travel costs.

So, if your employees have recently taken a business trip or are due to take one soon, then remember that many of the costs involved can be deducted. Make sure you keep track of the receipts so that you and your accountant can easily claim expenses when filing your returns.

Does an employer have to pay employees’ travel expenses?

When it comes to business journeys and work-related travel, it is typically the responsibility of the employer to cover any relevant costs incurred. This can vary depending on the work arrangement and employee’s contract.

However, it is usually good practice for employers to arrange transport and accommodation or reimburse employees for business-related travel, as it ensures employees are paid for expenses that benefit the company.

Plus, if you do cover these costs, you are eligible for certain tax deductions, which, in turn, can reduce your taxable profits, and help you attract and retain talent.

In situations where an employer doesn’t cover an employee’s travel expenses, the employee may be able to claim tax relief instead, as long as they meet the specific criteria set by HMRC.

HMRC business travel expenses guidelines

If you are covering the cost of your employees’ business travel, you can claim tax relief on some of these expenses. However, you will need to keep a few things in mind when it comes to HMRC compliance.

Firstly, the travel and subsistence costs must be “wholly and exclusively” for business purposes to qualify. This means they need to contribute to running or developing the business.

Secondly, there are various ways in which you can choose to cover these costs. You can reimburse them for the entire cost of their travel and subsistence, so long as they provide receipts, or you can set a fixed amount they can spend during the business trip.

What if the business trip requires employees to stay away?

When employees are required to stay away for a night or more, they will require overnight accommodation, which is classed as a subsistence cost. As an employer, you can cover these costs and reclaim any tax and VAT on them when filing your returns.

What are subsistence expenses for employees travelling?

When travelling for business-related matters, as a business owner, self-employed individual or employee, you’ll often need to pay for things like food and accommodation to keep you comfortable on your trip. These daily living expenses are known as subsistence.

As an employer, you can cover these expenses for your employees. However, if you choose not to cover subsistence costs, tax-paying employees can claim tax relief instead.

HMRC has set out a handy benchmark for subsistence rates, detailing a fixed amount you can cover that is National Insurance and tax-free.

The UK travel expenses benchmark rates are as follows:

Maximum length of journeyMaximum meal allowance
5 hours£5
10 hours£10 
15 hours (past 8 pm)£25

These rates are only in relation to subsistence payments and do not cover overnight accommodation, as HMRC have not yet set a benchmark rate for accommodation expenses.

If you choose to reimburse employees at a higher rate than that set out by HMRC, you may be required to pay PAYE tax and National Insurance on the additional cost.

How much can an employee claim for subsistence expenses?

While there is no limit to how much employees can spend on subsistence, as an employer with a growing business, it may be wise to set an upper limit on the amount they can claim.

It is also vital for employees to keep receipts of their travel costs to show proof that their claim is accurate.

How do you manage travel expenses

Managing travel expenses doesn’t have to be a daunting task. There are many things you can do to ensure you can cover any travel and subsistence costs an employee arranges while reducing the tax and National Insurance impact.

Here are some of our top tips for staying on top of your travel expenses:

  • Clearly outline your company’s travel policies
  • Use digital tools and accounting software to maintain records
  • Utilise corporate discounts when travelling
  • Ensure expense reports are accurate and on time
  • Stay informed on tax regulations

Get tax advice from Spotlight Accounting

At Spotlight Accounting, we are here to help you understand your company’s finances, guiding you to your full potential. We are a friendly team of chartered accountants dedicated to making our client’s businesses more profitable.

As a team of enthusiastic number-crunchers, strategic minds and tax experts, we’ll help you understand the intricacies of business travel expenses.

To find out more about how we can help you, please get in touch today!

Frequently asked questions about business travel and subsistence expenses

For more information about claiming expenses on business trips, take a look at some of our FAQs below.

What happens if I lose receipts for my business travel expenses?

As a business owner, you should be well aware of the importance of keeping receipts. Losing a receipt for business expenses when travelling can be frustrating, but you may still be able to claim back some of the costs if your employees can’t provide proof of their expenses.

Ask the employee to gather any supporting documents, such as bank statements and confirmation emails or contact the vendor to see if they can provide a copy of the receipt.

If you cover employees’ travel expenses at the benchmark subsistence rates set out by HMRC, then you may not need to provide a receipt to make a claim.

Is there VAT on travel expenses?

Most travel-related expenses do not include VAT, although some do. If your business is VAT registered, you can reclaim VAT on certain travel expenses, such as plane tickets and hotel accommodation.

What is a per diem expense UK?

Per diem rates or allowances are a fixed amount of money you can pay your employees to cover their subsistence expenses while on business-related trips. It can cover daily costs such as food and other necessary purchases.

As an employer, you can choose the per diem rates you give to employees that fit their travel demands. HMRC also provides benchmark scale rates which cover these costs. If you happen to exceed the benchmark set out by HMRC, then you may be required to pay tax and National Insurance contributions.

Carrie Stokes Chartered Accountant

Carrie Stokes Chartered Accountant

I work with directors of limited companies in Shropshire, Staffordshire and the West Midlands giving them a clear and up to date financial picture of their business that they understand. Looking at the numbers, what they mean and how they can be improved to grow their business.

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