Subsistence Allowances

Introduction

Subsistence rules govern the expenses employees can claim when traveling for work. These rules ensure fair reimbursement while maintaining compliance with tax regulations.

Travel and Subsistence Expenses

Employees often incur costs when traveling for work, including:

• Accommodation

• Meals

• Transport (e.g., mileage, public transport fares)

• Incidental expenses (e.g., parking, tolls)

Employers may reimburse these expenses, but tax implications depend on whether the travel is to a permanent or temporary workplace.

Permanent vs. Temporary Workplace

Permanent Workplace

A permanent workplace is a location where an employee regularly performs their duties. Travel to a permanent workplace is considered ordinary commuting and is not tax-deductible.

• • • If an employee attends a location regularly, it is deemed permanent.

    • Employees can have multiple permanent workplaces at the same time.

    • A geographical area rather than a single location may be treated as a permanent workplace, so even if an employee travels around, it doesn't necessarily mean they qualify for subsistence:

• • • • • • If an employee is required to travel to different sites as part of their normal work, their whole geographical region might be considered their permanent workplace, meaning travel is not deductible.

          • However, if travel to a site is irregular, it may still be classed as temporary, allowing tax relief.

Temporary Workplace

A temporary workplace is a location where an employee works for a limited duration or temporary purpose. Travel to a temporary workplace is tax-deductible.

• If an employee works at a location for less than 24 months, it may be considered temporary.

• If the purpose of attending the workplace is short-term, it qualifies as temporary.

While a temporary workplace generally follows the 24-month rule, there are situations where even a short-term assignment might not qualify:

• • • If an employee is expected to work at a location for over 24 months, it is permanent from the start, even if they have only worked there for a few months.

    • If the employee spends over 40% of their time at a location, it could be considered permanent, even if it’s for less than 24 months.

Tax Implications

• • • Travel to a permanent workplace is not deductible.

    • Travel to a temporary workplace is deductible.

    • Employers must ensure compliance with HMRC guidelines when reimbursing expenses.

Claimable Expenses

Employees can claim various expenses when traveling for work, provided they meet HMRC’s qualifying conditions.

Accommodation & Meals

• • • Hotel stays for business purposes.

    • Meal allowances based on time away from the workplace.

    • Incidental expenses (e.g., laundry, phone calls, newspapers).

Mileage & Transport

• • • Public transport fares (train, bus, taxi).

    • Mileage allowance for personal vehicle use.

    • Parking fees, tolls, congestion charges.

Incidental Overnight Expenses (No Receipts Required)

Employees staying overnight for business can claim incidental expenses without providing receipts. HMRC allows fixed-rate claims for small personal costs such as:

• • • Newspapers

    • Laundry

    • Phone calls home

The current tax-free limits are:

• • • £5 per night for UK stays.

    • £10 per night for international stays.

Employers can reimburse these amounts without requiring receipts, provided they stay within HMRC’s limits.

Subsistence Rates Without Receipts

HMRC also allows flat-rate meal claims:

• • • Employees on business travel can claim meal costs using approved HMRC subsistence rates instead of actual receipts.

    • Rates vary depending on the length of time spent away from the workplace (e.g., 5-hour, 10-hour, or overnight rates).

    • The employer must use approved benchmark rates rather than an arbitrary allowance.

Examples of Claimable Expenses

Example 1: Overnight Stay in the UK

An employee travels for work and stays overnight in a hotel. They can claim:

• • • Hotel cost (if booked by the employer or reimbursed)

    • Meal allowance (up to HMRC-approved rates)

    • Incidental expenses (up to £5 per night without receipts)

Example 2: International Business Trip

An employee travels abroad for a conference. They can claim:

• • • Flight costs

    • Hotel accommodation

    • Daily meal allowance

    • Incidental expenses (up to £10 per night without receipts)

Example 3: Mileage Claim

An employee drives their personal car for a business trip. They can claim:

• • • Mileage allowance (e.g., 45p per mile for the first 10,000 miles)

    • Parking fees

    • Toll charges

Example 4: Late Night Taxi

If an employee has to work unusually late and public transport has ceased for the night, this would be considered an allowable claim.
Paying for an employee to use a taxi to and from work each day because they don't drive - is not an allowable claim.

In general, an allowance is available only where an employee has to work outside their normal remit.
If they have to go to a one-off location at the other end of the country - it's clearly allowed. If they nip to the pub down the road on lunch - it's not allowed.

Common Mistakes to Avoid

Mistake 1: Claiming for Ordinary Commuting

Employees cannot claim travel expenses for commuting to a permanent workplace. Only travel to temporary workplaces is eligible.

Mistake 2: Exceeding HMRC Limits

Employers must ensure that subsistence allowances do not exceed HMRC’s approved rates. Excess payments may be taxable.

Mistake 3: Lack of Documentation

While some expenses (e.g., incidental overnight costs) do not require receipts, most claims must be supported by proper documentation.

Mistake 4: Misclassifying Workplaces

Incorrectly treating a permanent workplace as temporary can lead to tax compliance issues.

Mistake 5: Misunderstanding the ‘geographical workplace’ rule 

Certain jobs involve regular travel, making them ineligible for subsistence claims.