As we approach the time when employers have to deal with P11d returns, it is worth having a recap on the general principles of what is allowable.
Travel expenses have specific tests which must be satisfied in order for an employee to gain a deduction. These rules are different from the general rule for deductibility of expenses in that they do not need to be incurred “wholly and exclusively”. This is because with any business travel there are likely to be elements of mixed or private purpose, e.g. meals on trips or overnight accommodation. Meals and overnight accommodation come under the heading of “subsistence” and these follow the rules on business travel.
In order for travel expense to be allowable, it must satisfy one of two tests. Either
- It is ‘necessarily incurred in the performance of duties’ or
- The travel is ‘for necessary attendance’
Allowable business travel expenses include the actual costs of travel, the subsistence expenditure and other associated costs that are incurred as part of the cost of making the journey. They consist of expenses you are obliged to incur in performing your duties. Tax relief is not normally available on travel costs relating to commuting to and from the normal place of work, or private travel. There are some special rules on Worksite Travel Costs however, where exceptions occur that should be considered.
Road Travel – Use of Private Vehicles
You may claim a cost per mile for allowable business journeys in your own vehicle. There is a distinction between the first 10,000 miles in any tax year and subsequent miles. The 2018 allowable mileage rates that may be claimed are as follows:
|Type of Vehicle
||Motorcycle – all
|First 10000 Miles
||45p per mile
||24p per mile
||20p per mile
||25p per mile
||24p per mile
||20p per mile
You must retain valid VAT fuel receipts to support your claim. There is currently no HMRC requirement to state the fuel type.
Road Travel – Use of a Hire Car
Occasionally you may need to hire a car, either for a specific journey or if your own car is being serviced or repaired. If you regularly use your personal car for business travel and claim mileage rates you cannot claim the cost of the hire car, you should continue to claim the authorised mileage rates.
If you don’t use your personal car for business and you hire a car in your own name for business journeys for short term use, the hire costs and fuel are an allowable expense. If the hire car is used for personal use a proportion of the hire costs will be disallowable.
Hiring a car abroad specifically for business purposes is an allowable expense and the hire costs and fuel can be claimed.
Rail or Air Travel
The cost of train or airfares for business-related journeys is allowable. Additional costs such as excess baggage claims are also allowable if they are incurred in the performance of your duties and have no personal element.
Other Allowable Travel Costs
Allowable travel costs include bridge, tunnel and road tolls, bus and taxi fares, car-parking charges and congestion charges provided they have been incurred on a business trip.
Overseas Travel Costs
The cost of overseas travel is allowable where you are obliged to incur the expense in the performance of your duties.
The cost of hotel accommodation for nights spent away from home on business may be claimed. The cost of maintaining a rental property may also be allowable provided that use of the property is necessary for business purposes, and a permanent residence is being maintained elsewhere within the UK where a regular pattern of commuting back to that residence is evident. Where a rental property is not used exclusively for business purposes the proportion of costs relating to the period of private usage is not allowable. In such cases it will be necessary to determine the appropriate split of private and business usage and claim only for the business use.
The cost of accommodation in relation to site work is allowable if the period of time at the site is both expected to be no more than 24 months in total, including any time spent on-site prior to the current contract and in fact does not exceed 24 months. The “40% rule” also applies here; claims can be made for accommodation at/near a temporary workplace but never near a permanent workplace.
Incidental Overnight Expenses Allowance
On a business trip you may incur personal costs such as private telephone calls, laundry, newspapers or the cost of childcare. HMRC regards these as personal rather than business expenditure and are not allowable. However, if you are staying overnight while either away on business or on allowable work-related training, you are entitled to claim a subsistence allowance.
There are two Incidental Overnight Expenses Allowance rates: £5 per night in the UK and £10 per night overseas (including Eire). No receipts need to be produced. These allowances can only be claimed in relation to an overnight stay, for example, on a business trip in the UK lasting 5 days with 4 overnight stays, £20 can be claimed.
Incidental Overnight Expenses Allowances in relation to site work are claimable if the overnight stay is associated with a period of time at a site that is both expected to be no more than 24 months in total, including any time spent on-site prior to the current contract, and in fact does not exceed 24 months. The “40% rule” also applies here; claims can be made for accommodation at/near a temporary workplace but never near a permanent workplace.
When staying overnight meals are an allowable expense. Food and drink must have been purchased after the journey commenced. As a result of this rule costs incurred in preparing a pre-packed lunch are not allowable expenses. The levels of costs that are generally acceptable to HMRC are as follows and claims need to be supported with a valid receipt:
- Breakfast or lunch: £15 in London and £10 outside London
- Dinner: £40 in London and £30 outside London
HMRC accepts that reasonable costs of alcoholic beverages with a meal may be claimed. Where you have dined with work associates, only the proportion of the total cost that pertains to you as the director is allowable unless the purpose of the meal is business entertaining. Appropriate identification and explanation of the receipts must be provided in English when submitted in relation to meals overseas.
If you would like to discuss any of this further then please get in touch 0116 2423400 or firstname.lastname@example.org
Nish Bathia, Director