Do you ever question which expenses your employees can claim? Here at McDade Roberts we are often asked to clarify this topic for our clients so we hope the below article is helpful.
Types of Expenses
The main types of expenses to which tax exemption applies are:
- Travel and subsistence expenses
- Fees and subscriptions
- Business entertainment expenses
Employees are able to claim tax relief in respect of unreimbursed business expenses.
What an Employer Needs To Consider
- Setting out a corporate policy of which type of expenses are reimbursable and the need for those expenses to be reasonable
- Requiring the completion of a standard expense claim form
- The need for any expense claim to be supported by a receipt
- Making checks on expense claims
- Requiring a senior person to authorise the claims
What Are Scale Rates?
The rules allow amounts based on scale rates to be paid or reimbursed, instead of the employee's actual costs in certain circumstances. Scale rates are generally for travel and subsistence expenses and consist of round sum allowable amounts for specific circumstances.
Benchmark Rates
Benchmark rates are a set of maximum reimbursement rates for meals. These rates apply only if the employee incurs expenditure in the course of 'qualifying business travel' as follows:
- One meal allowance per day paid in respect of one instance of qualifying travel, the amount of which must not exceed:
- a) £5 where the duration of the qualifying travel in that day is 5 hours or more
- b) £10 where the duration of the qualifying travel in that day is 10 hours or more, or
- c) £25 where the duration of the qualifying travel in that day is 15 hours or more and is on-going at 8pm
Bespoke Rates
These are rates negotiated and specifically agreed with HMRC in writing. HMRC has issued a specific form for this: PAYE: employer expenses and benefits exemption
Business Mileage Rates
Many employers and their employees use the statutory mileage allowances known as 'authorised mileage allowance payments' (AMAPs) when using their own vehicle for business. For cars and vans, the scale rate is 45p per mile for up to 10,000 miles in the tax year and 25p per mile above this.
For employer provided vehicles the fuel advisory rates can be used to reimburse fuel costs incurred in travelling on business. These advisory fuel rates are updated quarterly throughout each tax year.
Qualifying Travel Expenses
A business journey is one which either involves travel:
- From one place of work to another or
- From home to a temporary workplace or vice versa.
Journeys between an employee's home and a place of work which he or she regularly attends are not business journeys. Detailed further guidance is available in HMRC Booklet 490.
How McDade Roberts Can Help
Here at McDade Roberts we can advise on the creation and implementation of a robust expenses system for your business. We can also help with the completion of annual forms P11D. Please contact us for any further assistance or advice and remember that the first meeting is free of charge.