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28 February 2017

Making best use of benchmark subsistence allowances

If you pay your employees (or Directors) subsistence payments, the rules have always been a bit of a minefield where such payments are not supported by receipts.

Prior to April 2016 there were a lot of hoops to jump through if you wanted to make flat-rate subsistence allowance payments to your staff when they are travelling on business, including asking for HMRC’s permission up front. However, the new rules are far less onerous.

Providing your employee bought at least one meal while they are travelling on business (and regardless of the actual cost of that meal), it is possible to pay them the following benchmark subsistence allowances:

  • £5 where the business trip lasts at least 5 hours in a day;
  • £10 where the business trip lasts at least 10 hours in a day;
  • £25 where the business trip lasts at least 15 hours and ends after 8pm;
  • An extra £10 where the £5 or £10 rate applies and the trip ends after 8pm.

The business trip must be for a qualifying business purpose, but that covers most genuine business travel.

There is no need for the employee to submit a receipt to support the payment, and the allowance can be paid free of tax and NIC.

The allowances above equally apply to Directors, and while most Directors may claim for their subsistence costs already while travelling on business, the above amounts might exceed the actual costs and might therefore be preferable. These rules also allow businesses to provide key staff who travel a lot on business with a tax-free perk.

For more advice on this matter, contact me.

Key Facts:

  1. The rules for paying benchmark subsistence allowances were relaxed from April 2016
  2. The allowances are free from tax and NIC and only require one meal to have been bought
  3. The rules apply providing the trip is for a qualifying business purpose
  4. Benchmark rates range from £5 to £25 depending on length of trip and when you get home
  5. Directors could benefit where the allowances exceed actual costs

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