travel expenses hmrc

HMRC travel expenses: guidelines for business travel & tax in the UK

Published on January 16, 2024

Corporate travel has developed a love/hate reputation. For employees, it's exciting to get out of the office and change up the routine. For employers, travel is a key driver of growth. Meeting prospects and clients in person is still incredibly effective , even if feels a little old fashioned.

So there's plenty to love.

And yet,  managing travel - and especially travel expenses - is nobody's idea of a good time. Particularly when the rules and regulations from HMRC aren't clear to everyone.

So to help, we've put together this guide to travel expenses for UK businesses . Once you understand what HMRC expects (and therefore what you need to do), managing travel doesn't feel quite so painful.

Disclaimer: This is not legal, accounting, or tax advice -  it's simply a guide. If you need help, check with your accountant or contact HMRC directly .

Now, let's start with the obvious question.

What are travel expenses?

As the name suggests, travel expenses are company expenses incurred while travelling . These include transport costs, meals, and vehicle mileage , among others.

And as with all legitimate business expenses, companies may be able to claim tax relief on these costs. If it meets all of the correct requirements, business travel is normally free from tax .

So both for companies and individual employees, it makes fiscal sense to track and claim tax relief on business trips.

HMRC travel expenses: the basics

HMRC may provide tax relief if costs fall into the following categories :

Public transport costs

Hotel accommodation if you have to stay overnight

Food and drink

Congestion charges and tolls

Parking fees

Business phone calls and printing costs

As long as these occur during business travel, the company should be able to claim relief.

So what counts as business travel?

LeeP Financial shares this handy reference guide for company managers and employees:

Part of what makes all this tricky is the overlap between private and business travel . It’s not always clear exactly what counts as each.

Private vs business travel

The distinction between these two forms of travel is a common cause of confusion. It’s simply not always clear cut whether a trip is entirely for personal or business reasons .

There can easily be portions of a business trip that look like personal travel, and vice versa.

According to HMRC, only two types of travel qualify as “business” trips:

Journeys employees make in the performance of their duties (where travel is part of their duties)

Journeys to or from a place they have to attend in the performance of their duties (travel to a place where attendance is in the performance of the duties). This usually means visiting a temporary workplace or site outside of their regular commute.

So if travelling  is  your job, or if you have to visit a specific location in order to do your job, this is business travel.

Crucially, “ordinary commuting” is explicitly not counted as business travel.

Travel expenses for employers

Employers are required to report all travel expenses paid to employees during the year . There are some exceptions to this rule, especially where you’re paying HMRC’s advisory rates, or where you’ve applied for a specific exemption .

A few things to keep in mind :

Some expenses like fuel and meals have fixed rates. If you reimburse employees at higher rates, these become earnings (like salary), and are subject to PAYE and National Insurance.

If you provide extras like transport to employees for private travel , this becomes a benefit and is subject to National Insurance as well.

To be deductible, expenses need to be “wholly and exclusively incurred” for the purposes of running the business or generating more business.

But this doesn’t mean every aspect of a trip needs to be related to business. Bleisure trips are permissible, but only the business aspects of that trip can be deducted .

This should be common sense for most businesses. And as long as good records are kept and there’s a smooth process in place, you shouldn’t have much trouble managing travel .

Travel guidelines for employees

If you travel for work, incur expenses as a result, and these expenses are not reimbursed by your company, you may be able to claim tax back from the government .

To claim tax back for any kind of work expense (including travel), a few conditions must be met:

You personally pay for a necessary work cost

This cost is only necessary for work

Your employer doesn’t pay you back

Your employer doesn’t offer you a suitable alternative

And of course, you also have to pay tax, since this is a tax break.

Claiming travel expenses from home to work

We’ve seen that travel expenses can be claimed if you’re travelling to a place of work. But equally, you can’t claim if your travel counts as commuting. So what’s the core difference?

Permanent vs temporary worplaces

Commuting is the regular travel you make to a permanent workplace . Thus, if you want to claim tax back for work travel, these trips need to be to or from a temporary workplace.

In most cases, that’s going to be pretty simple. If you’re out on a sales call, going to a conference, or visiting another branch of the company, you’re not going to your permanent workplace.

Another little note : if your travel to a temporary workplace is not really any different from your regular commute (in time, distance, or costs), you can’t claim relief for this either. So if you're heading to a client just down the road, this is probably not going to count.

For more details, read the section on "the 24-month rule"   below .

Common causes of confusion

Let’s look now at a few of the most common - and often most confusing - areas for mistakes.

Meals and subsistence rates

Not every single pound, dollar, or euro spent while travelling is going to be reimbursed. That would leave the door open to abuse - Michelin-starred meals and exorbitant bar tabs claimed as “business costs.”

To set clear rules and expectations, HMRC has provided a list of meal allowance rates for different cities and countries . These work like a per diem , standardised for all UK businesses. And they also include the cost of accommodation.

When reimbursing employees for meals, companies have a few options:

Use the set amounts allowed by HMRC

Negotiate another rate with HMRC, if the rates provided don’t meet the company’s needs

Reimburse employees in full, no matter the cost

Note : If your business opts for the third choice, the amount reimbursed will only be tax-free up to amount allowed by HMRC . So you can reimburse at a higher rate if you choose, but you’ll have to pay tax on the difference.

Read our full article on meal allowance rates here.

Alongside meals, HMRC has also standardised the amount companies can reimburse employees for fuel tax-free . This reflects the fact that every car has a different expectation of efficiency, and that fuel prices fluctuate.

Instead of trying to deal with this on a case-by-case basis, HMRC has assigned advisory fuel rates for company travel. These apply in two cases:

When reimbursing employees for work travel done in company cars

When employees need to repay the company for private travel in a work car

In either instance, advisory fuel rates tell companies and employees exactly how much they should expect to pay or receive per mile.

Read our full explanation of advisory fuel rates here.

The 24-month rule

We already wrote a detailed explanation of HMRC’s 24-month rule . It’s a relatively simple test to help you figure out whether a workplace is temporary or permanent . If it’s permanent - as a result of meeting the 24-month rule - employees and companies cannot claim tax relief for travel expenses.

Two key conditions have to be met for the 24-month rule to apply:

The employee must have spent or be likely to spend more than 40% of their working time at a workplace, AND;

They must attend it or be likely to attend it over a period lasting more than 24 months.

So in short, if you spend more than 40% of your time in a single workplace over a 24-month period - that’s a permanent workplace .

There are always complications to these rules, so it’s worth reading that article linked above.

Employed, self-employed, both, or neither?

Naturally, there’s no one-size-fits-all rule for employee travel. Your tax rights and obligations depend on your employment status, among other things.

And - especially in the modern careers landscape - there are whole range of different circumstances that can complicate matter. These affect:

Agency staff billing out time to clients

Employees working through umbrella companies

Contractors working through a limited company for a larger company

“Personal Services Companies” (hairdressers, care workers, and labourers, among others) fall under the IR35 legislation and may have other obligations.

This isn’t the time or place to go into all of these circumstances in detail. This post from the Low Incomes Tax Reform Group does a great job of highlighting the differences.

But to clarify: in this post, we’re mainly speaking to companies and their full-time employees .

Best practices to manage travel expenses

As a bonus, here are a couple tips and best practices on handling travel expenses from around the web.

Contractor Calculator - Keep clear records

Contractor Calculator writes for contractors - obviously. But this advice is valuable whether you’re a sole practitioner or run a company of 10,000:

“Both limited company and umbrella company contractors must retain copies of receipts and tickets , and detailed mileage logs, so that they can prove the journey actually took place if investigated by HMRC.”

And of course, you’ll want those receipts if you have come up against a full on audit.

Spendesk - Automate as much as possible

Aside from misunderstood rules, the biggest issues with travel expenses normally relate to admin. Filing and processing every single expense claim by hand is a huge productivity killer.

When it comes to business travel , the more you can automate your expenses, the better.

This means looking for a good travel and spend management tool , like Spendesk. These let you automate processes, and also build in your company travel policy to keep everyone in line.

Work travel shouldn’t be a bore

For many employees, travelling for work is a great privilege. The chance to visit new cities, meet clients, and have new experiences is too good to pass up. They’re the lucky ones.

Too often, business travel gets bogged down in minutiae . The little things - expense reports and transport issues - can overshadow what should be a break from the norm. Which is a shame.

But with good planning, and better technology, corporate travel goes back to being a benefit. So find yourself a good travel management tool , get a smarter way to track expenses and store receipts, and stop sweating all of those little issues.

You can start with this clever travel planning workbook:

For more information about HMRC's rules and guidelines, take a look at these other recent articles:

HMRC VAT returns: an introduction for UK businesses

UK per diem: How HMRC meal allowance rates work

HMRC mileage allowance: How to manage employee car travel

Expense receipts: What is a valid proof of purchase?

e-Receipts: How to store digital receipts for your business expenses

How HMRC advisory fuel rates work for UK businesses

HMRC Employment Allowance: the rules & how to claim

How HMRC research & development (R&D) tax credits work

More reads on Business travel spend

Travel and expense policy best practices: 8 tips

How business travel is changing in 2019

Get started with spendesk.

Close the books 4x faster , collect over 95% of receipts on time , and get 100% visibility over company spending.

The rules on travel and subsistence: a long and winding road

Employment tax.

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As our working patterns shift and more of us move to hybrid working, what impact will this have on claiming tax relief for travel and subsistence expenses?

What is the issue?

While travel and subsistence is an area of compliance that seems straightforward on the face of it, it can actually be extremely complex for employers to understand and get right.

What does it mean for me?

Key considerations include rules concerning permanent and temporary workplaces, ordinary commuting and working from home. Make sure your policies are clear on what travel and subsistence expenses employees can claim.

What can I take away?

With the move to widespread hybrid working, we expect to see HMRC increasing its focus on these types of travel and subsistence expenses.

The coronavirus pandemic has significantly changed the way we work. Homeworking has become the norm for many more employees who previously spent all or almost all of their time in offices. Millions of us are now working from home for two or three days each week and spending the rest of the working week in the office. Homeworking and hybrid working appear to be here to stay.

That all sounds familiar and straightforward but the nub of the problem is that, for travel and subsistence expenses, even though more employees work remotely and/or are much more mobile than they used to be, the current tax rules covering employee travel and subsistence have not changed substantively since April 1998.

It was widely hoped back in 2016, when the last review of the travel and subsistence rules took place, that some of the shortcomings in the rules might be addressed. But the fact they were not should come as no real surprise, as the 1998 amendment itself aimed to change rules that had dated back some 140 years.

While travel and subsistence is an area of compliance that seems straightforward on the face of it, it can actually be extremely complex for employers to understand and get right. It is no coincidence that HMRC has issued a guidance booklet with over 70 pages to help explain the rules, and that it focuses on travel and subsistence during its reviews of employer records. 

In the past, HMRC has undertaken detailed reviews of situations where employees have a workplace at home but also another elsewhere (such as their employer’s headquarters) and the employer meets the cost of journeys between their home and the other workplace; or where the employer is paying travel and subsistence expenses for what they believe is a move covered under the ‘detached duty’ rules allowing for the amounts to be paid tax free. With the move to widespread hybrid working, we expect to see HMRC increasing its focus on these types of travel and subsistence expenses.

Within the current system, there are two main things to bear in mind relating to travel and subsistence.

The first (under the Income Tax (Earnings and Pensions) Act (ITEPA) 2003 s 337) is that tax relief is provided for ‘travel in the performance of the duties of the employment’. In other words, relief is given for travel that is an intrinsic part of an employee’s job and may include journeys between two workplaces. This rule is generally well understood by employers and often applied correctly in practice, but this could change going forward as more employees work from home and employers incorrectly conclude that their employees’ homes are workplaces for tax purposes.

However, it is in relation to the second rule (under ITEPA 2003 s 338) – which provides tax relief for necessary journeys to workplaces that employees must attend for work purposes, apart from those amounting to ‘ordinary commuting’ – that problems most often arise.

Key terms and considerations

The key terms and considerations needed to understand the rules are summarised below. Note that the rules for subsistence are similar to those for travel. If a business journey is allowable for tax purposes, the subsistence cost attributable to that journey generally is also allowable, unless there are issues around excessive expenditure, dual-purpose trips, and round sum or benchmark allowances.

Travel and subsistence expenses which attract tax relief and satisfy the exemption for paid or reimbursed expenses (ITEPA 2003 s 289A) do not need to be reported to HMRC.

Any travel expenses paid by the employer which do not attract tax relief, and which are not exempted by ITEPA 2003 s 289A, will (depending on the circumstances and subject to a PAYE Settlement Agreement being in place to cover such costs) either need to be:

• reported and dealt with at the tax year-end on forms P11D and P11D(b);
• reported and subjected to tax and Class 1 National Insurance Contributions (NIC) under PAYE at the time of payment; or
• reported and dealt with at the tax year-end on forms P11D for tax purposes and subjected to Class 1 NIC under PAYE at the time of payment.

HMRC penalties for non-compliance can be costly. For example, if incorrect P11Ds are filed negligently, a penalty of up to £3,000 per form can be levied by HMRC (although normally only in the most serious cases).

It could also mean that employers are liable for any tax and NIC that has been underpaid, potentially on a grossed-up basis, plus late payment interest. This can get expensive and large settlements have been seen on HMRC compliance reviews covering travel and subsistence expenses, particularly for large businesses. Settlements are often in relation to homeworkers having another permanent workplace and being paid for their travel expenses between their homes and those permanent workplaces; and travel from home to places which are not considered to be a temporary workplace.

1. Permanent workplace

A ‘permanent workplace’ is considered to be somewhere that an employee works regularly to perform their duties of employment. In many instances, it can be clear whether or not somewhere is an employee’s permanent workplace and, therefore, whether a journey to it can be deemed ordinary commuting. It is also possible for an employee to have more than one permanent workplace at the same time.

Travel to or from a permanent workplace and an employee’s home is generally treated as private rather than business travel, and so tax relief is not due on any related costs that are paid or reimbursed by an individual’s employer.

Necessary travel which takes place between one permanent workplace and another while an employee performs their duties of employment during the working day is treated as business travel and attracts tax relief.

2. Temporary workplace

A ‘temporary workplace’ is somewhere the employee attends to perform a task of limited duration or for a temporary purpose. So even if they attend it regularly, it may still not be classed as a permanent workplace.

There is, however, a special rule which treats a workplace that would otherwise be a temporary workplace as a permanent workplace, where an employee spends or is likely to spend more than 40% of their working time at that workplace over a period that lasts or is likely to last more than 24 months (known as the ‘24 month/40% rule’).  

Bear in mind that the 24 month/40% rule treats locations that would otherwise be ‘temporary workplaces’ as ‘permanent workplaces’. If the workplace is not temporary in the first place (as it does not meet the definition laid out in the Employment Income Manual at EIM32075), the workplace would already be treated as a permanent workplace.

Travel to or from a temporary workplace and an employee’s home is generally treated as business rather than private travel; and so tax relief is due on any related costs that are paid or reimbursed by an individual’s employer, unless it is substantially the same journey in which case no deduction is allowable (ITEPA 2003 s 338(2)). This is not often considered by employers and very few expenses policies ever have this covered.

Such distinctions can be confusing – and as highlighted above, this is one of the areas of travel and subsistence on which HMRC focuses its attention. Employers often fail to consider the task involved or the purpose for working at a given location, which is what the legislation requires.

The employee’s attendance is not in question; the issue is whether the task itself will be undertaken for a limited duration or whether it is performed for a temporary purpose. The trouble is that many employers fail to look too deeply at the matter and simply consider the ‘24 month/40%’ rule, without first considering whether the workplace is capable of being a temporary workplace.

HMRC may ask for contracts, diaries and job descriptions in order to determine whether the locations visited meet the definition of a ‘temporary workplace’. Covid-19 has also presented a particular issue in that HMRC’s view is that the clock remained ticking even when government gave instructions to work from home where possible, so many employers are likely to find the 24 month period has expired during the last few years while employees have been working from their homes.

It should also be remembered that the word ‘task’ is not defined in the legislation. As a result, the normal dictionary definition applies. Here a ‘task’ is something specific; for example, a piece of work, rather than a group of things to do, which is the nature of a job more generally.

3. Ordinary commuting

For most employees, ‘ordinary commuting’ is the journey they make most days between their home and permanent workplace. Travel and subsistence expenses would normally be taxable here if the costs of ordinary commuting were paid for or reimbursed by their employer, or if travel facilities were provided.

But for some staff, the situation is more complicated. For example, if the journey to a temporary location is broadly the same as an employee’s ordinary commute to their permanent workplace, tax relief would be denied on the basis that the journey is normally treated as private travel.

This rule applies generally if the journey is in the same direction or on the same route, and amounts to less than 10 miles extra each way than the normal commute. This area is rarely explained in most employers’ travel and expenses policies but is again something that HMRC is increasingly focusing its energy on, particularly in major towns and cities.

4. Working from home

A key consideration when moving to a homeworking arrangement is whether the employer will meet the cost of the employee’s travel between their home and the office when they do travel into the office. This is of particular relevance to hybrid working arrangements.

The tax and NIC treatment of employees’ travel expenses can be complex and is particularly difficult to apply practically to modern working practices, such as hybrid working.

HMRC recently updated its guidance covering employees who work from home (EIM01471) to cover hybrid working. It now includes ‘Travel in the performance of the duties: travel to and from home where it is a place of work’ at EIM32370. The clear challenge with hybrid working is that when employees do travel into the office, often the statutory conditions in ITEPA 2003 s 337 will not be met for home to be a workplace for tax purposes, and under ITEPA 2003 s 338 the office will remain a permanent workplace.

Employers must therefore be clear when agreeing hybrid or homeworking arrangements which travel and subsistence expenses can be paid tax and NIC free and which cannot. EIM32174 covers ‘Travel for necessary attendance: employees who work at home: a hybrid working: example’.

In rare cases, ITEPA 2003 s 337 may apply, allowing for tax relief between the home (as a workplace) and another permanent workplace, as covered in EIM32370. The problem with applying ITEPA 2003 s 337 to hybrid working is that in many cases the location of the home isn’t dictated by the requirements of the job. HMRC notes: ‘For most people, the place where they live is a matter of personal choice. So the expense of travelling from home to any other place is a consequence of that personal choice, not an objective requirement of their job.’ The relief in ITEPA 2003 s 337 is therefore unlikely to apply to the majority of homeworking and hybrid working arrangements. It is worth noting that HMRC’s guidance says:

‘Most employers provide all the facilities necessary for work to be carried out at their business premises. So where employees work at home, they usually do so because it is convenient rather than because the nature of the job actually requires them to carry out the duties of their employment there. However, where it is an objective requirement of an employee’s duties to carry out substantive duties at the home address, then his or her home is a workplace for tax purposes.’

ITEPA 2003 s 338 then needs to be considered. This allows tax relief for travel expenses for the necessary attendance at any place in the performance of the duties of employment. To determine whether tax relief is due under s 338 for journeys between an employee’s home and their employer’s business premises, we need to consider whether the employee is travelling to a permanent or temporary workplace (see definitions above).

HMRC often quotes the case of Kirkwood v Evans [2002] EWHC 30 when looking at a ‘working from home’ situation. It concluded that although Mr Evans went to the Leeds office for only one day a week, it was a permanent and continuing part of his duties to do so. The judgment dealt with the situation briefly in a single paragraph, also stating that Mr Evans had conceded that the Leeds office was not his temporary workplace, even though the General Commissioners had concluded it was. The judge justified this view by saying: ‘This attendance was both regular and was not for the purpose of performing a task of limited duration or for some other temporary purpose.’

Perhaps Mr Evans was ill-advised to admit that Leeds was a permanent workplace. It could be argued that he undertook certain specific tasks each time he went there that were of limited duration; namely, delivering work he had performed since his last visit, taking new work with him, and downloading information from a database. On the other hand, HMRC seemed to argue that the word ‘task’ refers to doing these things each week on a continual basis.

There are, of course, also other special rules to consider on top of the above that cover areas relating to international trips, area-based and depot-based employees together with emergency call-outs.

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How employees can claim travel expenses.

Claiming travel expenses can be quite a tricky area, but it’s one that affects a large portion of the working population.

Thousands of workers across the UK have to travel in some form or another for work. There are a number of reasons to travel. Whether they’re travelling to visit a client, heading to a conference or simply running errands for the business.

HMRC offers a tax relief for any costs incurred whilst you are on the road for work-related reasons. These are known as travel expenses.

For one reason or another, lots of taxpayers aren’t making full use of this tax relief. Thousands of workers aren’t claiming back the travel expenses that they are entitled to.

So, what exactly are travel expenses? And how do you claim this rebate?

We’ll take a closer look at everything you need to know about how employees can claim travel expenses.

Here’s What We’ll Cover:

What Are Travel Expenses?

What counts as a travel expense, what counts as business travel, what counts as a workplace, can i claim travel expenses if i work from home, how can i claim for travel expenses, how much can i claim, key takeaways.

As the name suggests, travel expenses are expenses incurred whilst travelling. In this case, they are expenses incurred whilst travelling for business purposes. These expenses include transport costs, meals and vehicle mileage among a number of others.

As with all legitimate business expenses, companies and employees are able to claim tax relief on these costs. This is because if the expenses tick all of the required boxes, business travel is free from tax.

This is why it makes financial sense for both companies and individual employees to keep track and claim tax relief on business trips.

HMRC may provide tax relief on business-related travel expenses, also known as HMRC travel expenses , if the costs fall into the following categories:

• Public transport costs
• Hotel accommodation if you have to stay overnight
• Food and drink
• Parking fees
• Congestion charges and tolls
• Business phone calls
• Printing costs

Essentially, as long as any of the above occurs during business travel then the company should be able to claim relief.

According to HMRC, to be eligible to claim for relief if you have to be travelling for a ‘business purpose’.

Simply put, you can claim for any trip that’s outside your everyday commute to and from work. The journey you take to and from work is classed as regular commuting and is not seen as counting as a business trip by HMRC.

You can, however, claim for journeys that fall under a business category. They also require you to travel to a location that isn’t your place of work or your home.

For example, this may mean you driving to:

• An office location that isn’t your usual base of operations.
• An event, such as a work-related conference or seminar.
• A customer’s workplace for a business meeting.
• A training centre for a required training course.
• A temporary separate office if your usual office is out of action.

There are two types of workplaces that are recognised by HMRC. Those are:

Permanent Workplaces

This is judged by HMRC looking at how much of an employee’s time is spent at a particular workplace and if they are regularly there or not.

There isn’t a particularly large requirement for a place being a permanent workplace. For example, if an employee goes somewhere just once a week this is almost always counted as a permanent workplace.

HMRC defines it as:

“If the task is going to last more than 24 months and the employee is going to spend more than 40% of their time on-site, the workplace where the task is carried out becomes permanent.”

Temporary Workplaces

A workplace is defined as temporary if an employee only goes there for a short-term task. Travel to and from a temporary workplace can be counted as business travel, not normal commuting.

This means that you can claim expenses for business travel if you are travelling between both permanent and temporary workplaces.

Since the COVID-19 pandemic, we have seen a huge increase in employees working from home.

According to HMRC, if an employee works from home for no other reason than convenience, then any home-to-work journeys count as normal commuting.

However, if an employee works from home because their job requires them to, then that changes. Let’s say that their employer doesn’t provide the facilities on-site, then your home becomes a workplace. This means that travel from your home to other workplaces becomes business travel.

To claim for travel expenses as a form of relief, you will need to have detailed records to back up your claim. These could include:

• Details of Your Journeys: This may be a diary of locations visited and the dates that you made the trip.
• Pay Slips: If your payslips show your business mileage or lodging costs paid by your employer then they can be used as evidence.
• Receipts for Accommodation: You will need to provide the receipts for travel expenses and/or sustenance expenses.

To claim your travel expenses as an actual expense you have to file a claim with HMRC. You have up to four years from the end of the tax year to claim it.

To make a claim, you must:

• Keep a record of your business-related mileage expenses.
• Multiply your yearly mileage by the current AMAP mileage rate and deduct your employer’s mileage allowance, if any.
• If it is under £2,500, you can file your claim on your self-assessment tax return.
• If your claim is over £2,500 then you must file a self-assessment tax return.

In terms of how much you can claim, it depends on a number of factors:

• How much you have spent.
• How much tax you have paid.
• If your employer has reimbursed you.

There may be a scenario where an employer has paid their employee some percentage of their travelling expenses. If that is the case then they may still be eligible to claim for travel expenses if:

• The allowance doesn’t cover the full cost of your expenses.
• The allowance paid by the employer is then taxed.
• The employee uses their own car and the mileage allowance is less than the government-approved rates.

It’s important for both business owners and employees to know how much they can claim and what they can claim for.

The amount of tax relief you can claim can really add up and make a difference to your overall bottom line. It is a form of relief that any business is entitled to so it should be utilised.

To keep track of your business expenses and business miles, try using expense tracking software such as FreshBooks.

Are you looking for more business advice on everything from starting a new business to new business practices?

Then check out the FreshBooks Resource Hub .

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Managing business travel expenses

Guide to hmrc subsistence allowance & expenses, what is a subsistence allowance, how do hmrc subsistence rates work.

• The cost of food or drink must be incurred after the business trip has started
• The trip must be beyond their usual commute and be done as part of official business.
• The journey must take the employee away from their normal place of work for 5 hours or more.

Is meal allowance taxable?

• a meal or beverage is not purchased
• the meal does not constitute additional expenditure
• the “staying with friends or relatives allowance” is claimed
• meals have been taken at home
• meals are provided during a training course, conference or similar activity
• meals are provided on the train or plane and included in the ticket cost

What are the HMRC domestic subsistence allowance rates?

• £5 for travel of 5 hours or more (£10 supplement if travel is ongoing at 8pm)
• £10 for travel of 10 hours or more (£10 supplement if travel is ongoing at 8pm)
• £25 for travel of 15 hours or more (and ongoing at 8pm)

Overnight accommodation rate UK

Meal allowance rates overseas, how does a business report subsistence allowance spend.

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You are here: Home » Guides » Information » A starting point for employees » Employee expenses » Travel costs

• Travel costs

Employee expenses

The tax treatment of employee travel expenses is quite complicated. In outline, you can claim travel which you necessarily have to undertake in the course of your employment. You cannot claim travel which is ‘ordinary commuting’. This normally means travel from home to your usual place of work. You usual place of work is called a ‘permanent’ place of work, for tax purposes. To get a grip on the tax position we need to look at some complicated definitions!

Home to work travel

The tax rules say that travel from home to a permanent work place is not an allowable expense for tax purposes. By contrast, travel from home to a temporary workplace is an allowable expense.

Travel from your workplace

Travel to visit, for example, customers, clients or suppliers from a both a temporary or a permanent work place is allowable.

Travel from home to customers, suppliers or clients may be allowable in some circumstances – see http://www.hmrc.gov.uk/manuals/eimanual/EIM32005.htm

Permanent work places

It is particularly important to decide if a particular workplace has become a ‘permanent’ workplace. To understand how these rules work, we need to look at how HMRC defines a permanent workplace.

HMRC says that the ‘place at which an employee works is a permanent workplace if he or she attends it regularly for the performance of the duties of the employment.’ http://www.hmrc.gov.uk/manuals/eimanual/EIM32065.htm .

By contrast, ‘A workplace is a temporary workplace if an employee goes there only to perform a task of limited duration or for a temporary purpose.

Regular but still temporary

One difficult category is where you regularly go to a particular workplace, but expect to be based there for a short period – no more than 24 months.

HMRC accepts that if your work will based at one location temporarily, this can be a temporary workplace – http://www.hmrc.gov.uk/manuals/eimanual/EIM32075.htm .

A few specific points are worth noting here:

1) If you attend a work place continuously for more than 24 months, HMRC considers that it has become a permanent work place; (this is also so once it becomes apparent that you will be there for more than 24 months)

2) If there is no permanent place of work, the ‘area’ of work may be treated as the base. This might be true, for example, for a sales representative who represented a particular geographical area, but lived outside the area.

In this case the employee cannot claim the cost of travel from home to the area – but can claim the cost of travel within the area (see http://www.hmrc.gov.uk/manuals/eimanual/EIM32200.htm and the example at http://www.hmrc.gov.uk/manuals/eimanual/EIM32207.htm )

There is comprehensive guidance on this issue on the HMRC website at http://www.hmrc.gov.uk/manuals/eimanual/eim31800.htm .

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Home | Business Expenses | HMRC travel expenses

How to manage your travel expenses with HMRC

Learn about the rules HMRC set for travel expenses and see how Soldo can help you keep track of your travel expenses

HMRC travel expenses

As a business owner you will likely need to travel to grow your company, and travelling is never free. These business expenses , whether it’s rail fare, bus fare, or fuel costs , can add up. These charges can be significant, too, especially if your business is small and you need to keep costs down. Thankfully, there are ways to claim on these expenses and save quite a bit of money. If an expense qualifies as a business expense, you don’t have to deduct or pay tax and National Insurance on it, but to ensure this, you need to ensure that any expense meets the criteria set by HMRC. It’s quite a complex topic. Read on to find out how HMRC manage travel expenses and how Soldo can simplify the way you manage these costs.

Domestic travel

The most frequent journey you’ll take is of course the one from your home to your place of work. Unfortunately, this daily travel is classed as ‘ordinary commuting’ by HMRC, and it is not eligible for tax relief. This changes, however, if you have to take a business journey somewhere that isn’t your permanent workplace.

Travel expenses are allowable for tax purposes if you have to travel to somewhere outside of your usual workplace to what’s known as a ‘temporary workplace’. A temporary workplace is somewhere you’ll be travelling to for a limited period of time or somewhere you travel to infrequently.

A workplace only counts as temporary if you’ll be working there for less than two years. If you’re there for a period longer than 24 months, it will be classed as a permanent workplace, and you won’t be able to claim expenses on it. This is what’s known as the 24 month rule.

There is a caveat, however, in that this is only the case if you’re performing a substantial amount of duties at this location which, according to HMRC, is 40% or more of your workload. If it’s less than this, you may be able to claim it back.

HMRC also has an Approved Mileage Allowance Payment rate, or AMAP, and you can claim certain amounts depending on how much you travel. This travel of course has to be strictly business related.

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Other travel expenses

If you’re travelling for a long period, you’ll naturally incur other expenses that aren’t just related to the travel itself. HMRC allows you to claim business expenses under the term “subsistence allowance”, also known as a per diem or meal allowance; basically, everyday expenses you accrue in the process of running your business.

Although it’s known as a meal allowance, the allowance can stretch beyond food to fees such as business phone calls, congestion charges, and overnight accommodation. This is significant because if they’re designated as a business cost, they don’t need to be taxed, so your business saves money.

Manage travel expenses with Soldo

As you can see, there’s a lot to consider when thinking about travel expenses, and it’ll be worth your while to take a look at the HMRC website for details on how your business’ specific needs can be met by the criteria. But whatever expenses you’re able to claim, Soldo’s system of business expense cards can help to streamline your finances and make the process of your expense management much easier.

With Soldo you can set up any number of prepaid cards for individuals, teams, or sites. You then set the budgets for these cards and track how these budgets are being spent on the Soldo app, either on mobile or desktop.

For example, you may want to set up a scale rate payment for your employees. A scale rate payment is a certain budget you allow your employees to spend on subsistence charges, such as meals and travel. You will have to be certain, however, that employees are spending this allowance on necessary business transactions. This has the potential to become a headache for finance teams, as they may have to check through receipts to ensure the expenses are correct.

Soldo cuts time spent on expense claims in half.

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Frequently asked questions

Yes, you can claim for various expenses, ranging from train fare to business phone calls, but you’ll need to be sure these expenses are verifiably for exclusively business purposes. This is where Soldo comes in. Soldo’s smart prepaid system allows you to designate individuals with a certain budget, and then track that budget in real-time, straight from the app.

The 24 month rule refers to the difference between a temporary and permanent workplace. You are unable to claim expenses on any travel to and from a permanent workplace, but you can claim on travel to a temporary workplace. A workplace only counts as temporary if you’ll be working there for less than 24 months. With Soldo, these complexities of finance are made easier by our smart prepaid system and intuitive app which will automatically generate expense reports for you.

With Soldo you can assign prepaid cards to your employees and set budgets so you know exactly how much they’re spending. With travel expenses, it’s important to keep track of what exactly is being bought so that you can claim on them effectively, and Soldo makes this simple. See what your employees are spending as they spend it, and have that data integrated directly with accounting software such as QuickBooks Online and Xero.

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Track mileage automatically

Hmrc travel expenses guidelines, in this article, what qualifies as a travel expense, are reimbursements for travel expenses tax-free, what are per diem rates, travel expenses for employees, travel expenses for the self-employed, travel expenses for employers.

If you are a UK resident who travels for work, your business-travel expenses likely qualify for either reimbursement or tax relief.

HMRC travel expenses guidelines are a somewhat complicated matter, but in this article, we will give you an overview of the things you need to know when you want to claim back money spent on travel that is necessary for work.

The first thing to understand is that not all travel expenses are eligible for tax relief . Notably, HMRC only allows full tax relief on travel expenses that are "wholly and exclusively" for business purposes.

This means that if you mix business and personal travel, you will need to apportion the costs to determine which parts of your trip are eligible for tax relief.

Let's clarify which expenses HMRC recognises as business-travel expenses. These are costs that you incur while travelling for work purposes, such as:

• Train, bus, or airfare
• Car or van rental
• Mileage if you use your own vehicle
• Hotel or other accommodation
• Meals and refreshments (yes, this includes alcohol)
• Parking fees
• Tolls and congestion charges

One of the most common of these travel expenses is mileage. If you use your own vehicle for work purposes, you will need to keep a record of the dates and distances you travel for work, as well as the reason for each trip. The Driversnote automatic mileage log book makes tracking these things as easy as can be.

You can read all about best practices and HMRC rules in our complete guide to mileage in the UK .

Mileage tracking made easy

Trusted by millions of drivers

As a rule of thumb, if the expenses were necessary for the work that was done, and if the reimbursement does not exceed the actual expenditure or per diem rates, the reimbursement will be tax-exempt.

You will need to keep records of your expenses as proof for your employer and/or HMRC.

In an effort to simplify the process of tax deductions and reimbursements, HMRC publishes predetermined rates to cover business travel expenses. These can be used instead of being imbursed for the actual costs you incur.

A benefit to per diem rates is that you will not have to save receipts or invoices, you will simply have to be able to prove that you were on a business trip when the expenses were incurred.

There are per diem rates for both travelling within the UK and to other countries. In the UK, the HMRC per diem rates change depending on the duration and circumstances surrounding the trip. For the rest of the world, HMRC has published a list with the rates for countries and/or cities. 

It is actually possible to negotiate higher rates than the standard ones set by HMRC. But this will require time and legal work.

If you incur travel expenses while doing your job, you have two channels through which you can recuperate your costs.

The most common practice is that your employer will reimburse you.

If you are not reimbursed in full, or at all, by your employer, you then have the option to claim tax relief on the remaining expenses you incurred because of your business travel.

If you are a sole trader your business-related travel expenses are deductible from your taxable profits. What qualifies as travel expenses and the amounts that can be claimed for them follow the same rules as they would for an employee.

As long as you either reimburse your employees’ actual business-travel-related costs, or pay them after the per diem rate (either the standard one or a bespoke one you have negotiated with HMRC), you will not have to report or pay taxes on the reimbursement, as per HMRC’s website .

You will, however, need to keep records of all expenses and benefits you provide to your employees. This includes records of when and why the travel took place, along with receipts where possible.

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Reimbursements

Employee Travel Expenses in the UK

Business trips are often a welcome change from the daily office routine or working from home. However, they are always associated with costs and subsequent administrative work to settle the corresponding expenses . We provide an overview of what employees need to consider when it comes to travel expenses and how they can best benefit from tax exemption.

What are employee travel expenses?

Travel expenses arise from work-related activities away from the place of residence and the primary place of work. The primary place of work is considered to be the place where the employee works on a regular basis. If companies bear the costs for such business trips by employees, they can be deducted from tax under certain circumstances. If the conditions are met, business trips are exempt from tax. Both the employee and the employer can benefit from this if they provide evidence of the travel costs incurred.

But what kind of costs count as travel expenses? In summary, these are all costs that incur during the trip and serve to ensure its successful completion. This means not only travel costs, but also expenses for food and accommodation to keep up one’s strength. In addition, there are ancillary travel expenses such as parking fees and telephone charges.

Which travel expenses can employees claim?

• public transport
• hotel accommodation
• food, as well as drinks
• congestion and toll charges
• parking fees
• professional telephone calls
• printing costs

If these expenses are incurred during a business trip and for business purposes, they can be exempted from tax. Expenses of a private nature that arise during a business trip, for example from a private visit to a museum, cannot be claimed.

Employee travel expenses reimbursement

If employees want to settle their travel expenses, they have several options. The most profitable one: they forward their travel expenses in full to their employer, submit all the relevant receipts , and the employer transfers the total amount to the employee’s account. The employer can then post the expenses and have them exempted from tax.

In case the employer is reluctant to pay for the employees’ travel expenses, they can reclaim the tax from the government themselves under certain conditions. However, to claim back the tax, HMRC has specified certain rules for employees:

• The travel expenses exclusively incurred for work-related reasons.
• The employee has covered these travel expenses personally.
• The employer does not reimburse the employee for the travel expenses.
• The employer has not provided the employee with a suitable alternative.
• The employee pays taxes.

To benefit from tax exemption on certain expenses, the employee must of course be a taxpayer in the first place. To claim tax exemption for expenses, these must be submitted with supporting documents to HMRC within four years of the end of the tax year in question.

When is the trip a business trip?

To understand under which conditions employees can deduct their travel expenses from tax, it is first necessary to clarify what actually constitutes a business trip – and what does not. For HMRC, there are two permissible types of business travel. Option one: the traveller visits a customer in another city on behalf of the company, for example, to maintain contacts – a time-limited trip that serves a specific purpose. Or the employee travels to a certain location to carry out work: e.g., a construction site or a temporary workplace such as a branch office. 

The daily commute from home to the permanent place of work, however, is explicitly not considered a business trip and cannot be recognised for tax purposes. Furthermore, if you do not travel from home to your usual place of work in the morning, but to another place that is the same or a shorter distance away, this travel cannot be exempt from tax either – only business trips that go beyond the usual distance.

Permanent or temporary workplace compared

The duration of the employee’s activity at a specific place of work is the decisive factor for the question whether a trip to work is tax-deductible or not. Commuting to the permanent place of work – for instance, to the office where the employee usually works and which is mostly specified in the employment contract – is not deductible from tax. However, if the employee must work temporarily somewhere else, for example at a branch office in another city, the journey to this place can be claimed for tax purposes. But this only applies for 24 months: if the employee is required to work there for a longer time, the place is considered to be the new permanent place of work.

Reimbursements with Moss: More freedom for your team

When does work from home turn into a permanent workplace?

Since the onset of the corona pandemic in 2020, work from home has become increasingly popular. More and more employers are allowing or even encouraging their employees to work from home. It is becoming very common to let employees choose their preferred place of work themselves. But what does this mean for employees in terms of tax?

It depends: if the employee only works from home because of a personal decision, every trip to the office is considered commuting – and is thus not tax-deductible. But if the employer decides that the employee must work from home – for example, because there is no office at all anymore – the home office is the new permanent workplace. Every trip to another place of work then becomes a business trip and is deductible from tax.

Which travel expenses can be deducted by employees?

Not all kinds of expenses incurred on a business trip are tax-deductible. Private costs arising from a business trip may not be submitted to HMRC. It is not always that easy to distinguish between private and business-related costs – often the transition is fluent. So: what is deductible and when?

The expenses being deductible are:

• work-related travel not to or from the permanent workplace
• dinner and breakfast when a business trip runs overnight
• accommodation costs during a several-day business trip
• food and drink on a business trip; either the actual costs or the fixed rates set by HMRC
• all travel expenses related to official business, such as: public transport, congestion, toll and parking charges, telephone calls, printing costs, etc.

Non-deductible are:

• the regular way to the permanent workplace
• travel expenses not strictly related to work, e.g., the private visit to a museum, a sightseeing tour, or recharging a travel card
• penalty charges, e.g., tickets for illegal parking or speeding

Costs for food

To keep your strength up on a business trip, daily meals obviously play a crucial role. However, when away from home, it is difficult to cook or prepare food on your own, which is why frequent restaurant visits are customary. But: HMRC does not automatically exempt every restaurant visit. Instead, it has set limits up to which the costs can be deducted each day.

The respective limit depends on the length of the journey.

There is also a cap of £5 for breakfast. For dinner after 8pm the cap is £15.

Business travel mileage

If employees use their own vehicle for business travel, they can, up to certain limits, recover the costs from their employer – who in turn can claim them for tax purposes. Employers can pay the so-called “approved amount” without having to report it to HMRC. These payments are referred to as mileage allowance payments.

The approved amount is calculated by multiplying the employee’s annual mileage by the rate applicable to the vehicle. This rate depends on two factors: the type of vehicle and the total number of miles driven on duty.

Up to the approved amount, the employer can bear the employee’s expenses without having to declare this to HMRC. If, on the other hand, more expenses are covered, these additional costs are considered as employee salary and lead to corresponding tax payments.

If the employer does not pay the mileage allowance payments or not the full amount up to the approved level, the employee can claim the difference for tax exemption – also known as mileage allowance relief. In other words: the employee’s business travel mileage is either paid in full by the employer or the employee can claim tax exemption.

Moss: business travel made easy

Those who have completed a business trip do not want to spend a lot of time afterwards settling their travel expenses, submitting applications to their employer, or having to go through the hassle of declaring them in their tax return.

With Moss, there is a way to help employers to make work easier for their employees: through smart expense and invoice management that makes expense reports obsolete. This is because Moss gives employees the freedom to pay for all work-related expenses independently and responsibly during a business trip using a corporate card . Thus, travellers do not have to lay out the costs for accommodation, food, and transport, but can conveniently pay with a real or with a virtual corporate card – with an individual budget limit precisely tailored to the trip.

All receipts from the trip can be uploaded instantaneously via the web or mobile app – and the tedious expense report becomes completely superfluous. This allows employees to focus entirely on their work from the beginning to the end of the trip. It also saves time for the accounting department.

Reimburse with Moss: Give freedom to your team

Employee travel expenses are costs incurred by an employee on a business trip – for example, for means of transport, meals, or accommodation. The trip must be work-related and the external work assignment must not last longer than 24 months. Otherwise, the travel destination is considered a permanent place of work to which a trip is not tax-deductible.

Employees can either have their travel expenses reimbursed by their employer or submit them to the tax authorities themselves to benefit from a tax exemption. To have the costs reimbursed by the employer, all receipts for the trip must be collected and passed on. If the employee pays the costs personally and is indeed a taxpayer, a tax exemption can be claimed from HMRC.

All costs incurred on a business trip for professional reasons can be deducted – from transport costs to toll and congestion charges or parking fees to meals. This also includes overnight stays, charges for business telephone calls, or printing costs.

If employees use their own vehicle on a business trip, they can either have these costs covered by the employer or have them exempted from tax. The annual amount is calculated depending on the number of miles travelled and the type of vehicle.

For a business trip, you can either claim lump sums for meals or the actual costs – but only up to a certain limit. For a journey of 5 hours or more the limit is £5, for 10 hours or more it is £10 and for 15 hours or more it is £25. Breakfast can be deducted at £5 and dinner after 8pm at £15.

A business trip is defined by HMRC either as a short trip with a clear purpose – such as meeting a client somewhere other than the permanent workplace – or a longer trip to another place of work, such as a branch office. However, the maximum length for such external duty is 24 months.

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HMRC Subsistence Rates: Everything You Need to Know

Getting to grips with HMRC subsistence rates is key for any UK business, but it can feel like a lot to take on. 

What expenses can you claim for? How do these rules impact your budget? This guide aims to simplify things. 

We’ll walk you through:

What are HMRC Subsistence Rates?

Is meal allowance taxable in the uk, how hmrc subsistence rates affect your business budget, hmrc meal allowance rates for 2023/2024, international meal & room allowance rates for uk businesses, how to report subsistence allowance to hmrc, best practices for managing travel expenses, streamlining travel expense management with expensein.

With clear, easy-to-follow advice, we’re here to help you navigate these rules with confidence, making sure your business stays on track and in line with HMRC regulations.

The HMRC offers a handy set of guidelines for businesses that allow them to reimburse employees for certain work-related expenses. This is what we call subsistence rates . 

Essentially, HMRC subsistence rates are pre-set amounts that businesses can pay employees for travel costs without jumping through hoops every time for approval.

What Qualifies for Meal Expense Claims?

The expenses for meals or beverages must be paid for after the commencement of the work-related trip.

The trip must be outside of their regular commute and must be undertaken for official business purposes.

The travel must require the employee to be away from their usual workplace for a minimum of 5 hours.

Note : Starting from April 2019, HMRC has eliminated the need for businesses to present receipts for all expenses related to a business trip. This change means less paperwork for everyone involved - from business owners to finance teams to the employees filing claims.

Good news - since 1998, they're not. This means when your employees travel for work and eat out, these meal costs won’t be taxed.

For businesses, this is a win-win. If your meal expenses tick all the boxes we talked about before, you can subtract these costs from your total taxable income. Essentially, you're left with a lower taxable amount, which could mean paying less to HMRC.

If no actual meal or drink is bought.

If the meal expense isn’t extra to what you'd normally spend.

If you're using the "staying with friends or relatives" allowance.

If meals are eaten at home.

If meals are included as part of a training course, conference, or similar.

If your meal is included in the cost of your train or plane ticket.

Changes to HMRC subsistence rates play a big role in shaping your company’s budget, especially if your team often travels for work. 

Here’s what you need to know:

If these rates go up, you'll find that the costs for meals and small expenses during trips increase, which could bump up your overall travel and expense budget.

A decrease in rates, on the other hand, might give you a bit more wiggle room in how you allocate your budget.

It's super important to stay on top of these rate changes to make sure your business stays on budget and follows HMRC rules.

So, what can your business do to adapt?

Tips for Adapting to Changes in HMRC Subsistence Rates

Perform regular policy reviews. Keeping an eye on your travel and expense policies can help you spot where you might need to make some tweaks. Maybe it’s time to set some spending limits, tighten up approval processes, or encourage choosing less pricey options for meals and incidentals.

Use technology to your advantage. Leverage an expense management system to track and manage employee travel expenses efficiently. These tools can automatically update changes in subsistence rates, ensuring financial compliance and simplifying the reimbursement process.

Educate your team. Keep your employees informed about the importance of adhering to the updated subsistence rates and company policies. Regular training sessions can help ensure everyone is on the same page and can help reduce overspending.

Negotiate with vendors. For businesses with significant travel needs, negotiating rates with hotels and meal providers can lead to cost savings that help offset changes in subsistence rates.

Plan for contingencies. Always have a contingency budget for unexpected changes in subsistence rates or travel needs. This ensures your business can adapt without compromising on financial stability.

For travels lasting 5 hours or more : The maximum claimable meal allowance is £5.

For durations of 10 hours or more : A £10 meal allowance is applicable.

If away for 12 hours or more : You are entitled to a £15 meal allowance.

For a full 24-hour period or longer : The meal allowance reaches a maximum of £25.

The HMRC calculates these durations from the moment one departs from their home or primary workplace until their return.

Note : These HMRC travel and subsistence rates apply only to travel within the United Kingdom. For a comprehensive list of recommended allowance rates by country, visit the HMRC website .

For UK-based businesses with employees who travel internationally, HMRC offers a detailed list of suggested meal and accommodation allowances by country . 

Below, we’ve summarised the rates for some top business travel destinations to help with your planning:

United States (USD):

Meal allowances range from $21 to $34.50 for a duration of 5+ hours, and room rates vary, with cities like Boston and New York City on the higher end at around $239 and $216 respectively.

Canada (CAD):

Canadian cities like Ottawa and Toronto offer meal allowances from $38.50 to $47 for 5+ hours, with room rates up to $224 in Vancouver.

Europe (EUR):

In European cities, meal allowances for 5+ hours stretch from €22 in Berlin to €40 in Paris. Room rates in Paris are around €199.50, showcasing the variety across different cities.

In China, cities like Bangalore and Beijing provide meal allowances from ₹1685.50 (INR) and ¥232 (CNY) for 5+ hours, respectively. Room rates can go as high as ¥1344.50 in Beijing and ₹16809.50 in Bangalore.

In Singapore, a 5+ hour meal allowance is SGD 91.50 with room rates at SGD 318.

Hong Kong stands out with meal allowances of HKD 292.50 for 5+ hours and room rates reaching HKD 2376.50.

HMRC's guide includes how to utilise these rates for reimbursing employees for international business travel and reporting these expenses. 

This concise overview is to give businesses a quick reference to budget for travel expenses in various global cities.

When it comes to reporting your business's subsistence allowance spending to HMRC, the process folds into your usual end-of-year financial reporting. 

Specifically, you'll need to fill out a P11D form for each employee who has received expenses or allowances, such as per diem or meal allowances, over the tax year. In some cases, you might also need to complete an additional P11D(b) form.

Your team must submit their expense reports regularly , ideally after each business trip, to account for any subsistence expenses. 

Due to the broad nature of what can count as subsistence expenses, it's important to vigilantly review these claims. This helps in preventing false or exaggerated claims and ensures the integrity of your expense reporting against any potential fraud .

Visit HMRC’s website for a detailed guide on how to report expenses and benefits .

Create a clear travel policy : Draft a travel and expense policy that spells out what’s covered, spending limits, and how to get expenses approved. Make it as clear as possible.

Educate your employees : Make sure everyone knows the policy inside out. Offer guidance on how to spend wisely while travelling for work.

Opt for cost-effective options : Encourage the team to save money where they can, like booking hotels early or choosing budget-friendly meal options.

Leverage technology : Tap into technology with expense management software. It makes tracking employee spending and getting reimbursed much simpler.

Regularly review and update your policy : Regularly check and tweak your travel policy to make sure it’s up to date with the latest rules from HMRC and matches up with what’s happening in the travel world.

With these strategies, businesses can better manage their travel expenses , ensuring they stay economical and in line with HMRC standards.

For businesses looking to get a handle on travel and expense management, ExpenseIn is a game-changer.

What Makes ExpenseIn Stand Out?

Effortless expense tracking : No more wrestling with spreadsheets. ExpenseIn brings everything into one place, making it easier to create, approve, and report on expenses.

On-the-go claims submission : With its mobile app , submitting expenses is as easy as snapping a picture, whether it’s for a taxi ride or a business lunch. Plus, it automatically works out mileage and even how much carbon you’re using.

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HMRC Travel Expenses & Temporary Workplace Rules

• 11 May 2022

IN THIS ARTICLE

Employees who travel for work purposes may be eligible for tax relief on travel expenses that are not reimbursed by their employer.

The general rule is that travel expenses between an employee’s home and workplace are not allowable under HMRC rules, while expenses for travel between the employee’s home and a temporary workplace may be allowable, providing certain conditions are satisfied.

In this guide for employers, we outline HMRC’s rules on claiming tax relief for travel expenses to temporary workplaces and explain the so-called ’24-month rule’.

Claiming tax relief on travel expenses

The Income Tax (Earnings and Pensions) Act 2003 (ITEPA) states that in order for a travel expense to be allowable, it must satisfy one of two tests:

• It is “necessarily incurred in the performance of duties” (ITEPA s.337)
• The travel is “for necessary attendance” (ITEPA s.338)

  Additionally, the employee must be “obliged to incur and pay them as the holder of employment” (ITEPA s.337(1)(a) and 338(1)(a)).

Generally speaking, there is no tax relief available to employees for the costs of “ordinary commuting”. This has been defined as travel between the employee’s home and permanent place of work.

However, there are journeys which are made in the “performance of duties”, which can include trips between the office and another work location, such as visiting a client or customer or other “temporary workplace.” An example of this might be a solicitor visiting clients at home or attending court.

The word “temporary” is important here and has a specific meaning in tax law that is not the same as the ordinary, natural meaning of the word. HMRC describes a temporary workplace as being where employees are required to undertake any work at another location for a temporary purpose as part of their “core” employment.

Temporary and permanent places of work

Most employees have no problem identifying their permanent place of work because it is the place they regularly go to work. Perhaps it is an office, factory or retail outlet, but notably it is the venue the employer expects their employee to be. Some employees may have more than one permanent work venue, for example if their employer requires them to work in more than one location.

A temporary workplace is classed as a location where the employee attends irregularly or for a limited amount of time. For example, an employee who works in Leicester is required to work in Nottingham for a year. The Nottingham location would be classed as a temporary workplace under the rules.

However, the temporary workplace rule ceases to apply if the employee works at an alternative location for a continuous period of work over 24-months. This is known as the 24-month rule. The law defines a period of continuous work as a period during which the employees’ duties are performed to a meaningful extent at a particular workplace.

HMRC considers duties are performed to a meaningful extent if the employee spends 40% or more of their time at that workplace. Complications can arise where employees spend less than 40% of their time at a temporary workplace as to whether the 24-month rule applies. It may be wise at that point to seek advice from an accountant as to the particular circumstances.

The 24-month rule

This is a specific condition that allows employees to claim travel expenses for journeys between the employee’s home and their temporary workplace. The idea is that visiting somewhere other than a permanent workplace can lead to undue costs for the employee. HMRC views travelling to a temporary workplace as a legitimate business expense.

The 24-month rule has two notable conditions which must both be met in order for an employer to NOT be eligible to claim travel expenses:

• The employee must have spent or is likely to spend more than 40% of their working time at a work location, AND
• The employee must attend or be likely to attend the venue for a period lasting more than 24 months.

  If both of these criteria are met, the employer cannot claim tax relief on travel expenses to and from a place of work. So, if the employee spends more than 40% of their time at a work venue for over 24-months, HMRC class it as a permanent workplace.

As soon as the employer knows a contract will last longer than 24-months, they must stop claiming tax relief. This means that if the employer knows the contract at the alternative location will last at least two-years, they cannot claim from the start.

24-months is the total calendar period, and not the actual amount of time the employee spends working at the location. For example, if the employee works for two days a week commencing on 1st January, or if they work six-months on and then six-months off, they will reach 24 months on 1st January two years after. This continues to be the case even if new contracts are signed along the way.

In the example given above, the 40% rule would still apply. So a break of 15-months (60% of any two-year period) would be sufficient to make sure the 24-month rule does not apply. If the contract length is unclear, tax relief is available if it is assumed the agreement to work at the temporary location will not last more than 24-months.

As it is possible to have more than one permanent workplace, if the 24-month rule is met, the workplace is automatically deemed permanent, even if the rule can also be met in other work locations.

Tax relief is not available for private travel. This is defined as travel to any place that an employee does not need to be for work purposes.

Qualifying travel expenses

The 24-month rule prevents receipt of tax relief on travel expenses to temporary workplaces. But in order to claim tax relief, the employee must have had to incur the travel expenses in the first place.

Travel expenses for employees are tax deductible when certain conditions are met:

• Employees personally pay their own expenses receiving no reimbursement from their employer
• The employer reimburses any travel expenses paid for by the employee
• The employer pays the costs directly on the employee’s behalf
• The cost is met by travel tickets or credit tokens provided to the employee
• Travel facilities, such as accommodation, are provided directly to the employee.

  Travel expenses include the actual cost of the journey and all other associated costs such as food, accommodation, toll fees, car parking, taxis or vehicle hire charges.

Which travel expenses are allowable?

Site-based employees.

This is a category of employee who carry out their duties across several sites and means their place of work does not readily fit neatly into the definition of what is and what is not a temporary workplace within ITEPA guidelines. Each site must be examined on the facts and a determination made as to whether they are temporary or permanent sites. If it is deemed to be permanent, then under the rules, travel expenses are not allowable.

Ordinary commuting

Travel from home to a place of work is not allowable for tax purposes unless it meets one of the listed exceptions. If an employee is on secondment, their travel expenses may be allowable, but so long as an employee has chosen where they work (e.g., not on secondment) and choses where they live, there is no tax relief for the costs of travelling to and from work.

Travel cards

The underlying requirement of the expenditure must be considered, simply because an employee uses their existing rail season ticket for visiting a client utilising the same ticket, does not make part of the ticket’s cost allowable. However, if the employee is required by their employer to incur a higher level of expenditure above their ordinary commute, then the extra amount is allowable.

Accompanying spouses

If the employee’s spouse accompanies them, then those expenses are generally not allowed, unless the spouse’s travel meets the requirements. This is whether the travel expenses have necessarily been incurred for the purposes of the employment or are incidental to it. Such situations are rarely encountered, and more general reasons for spouses to travel are more likely to arise from attending particular functions, where the employee’s requirement to attend on their own is not enough. If an employee is travelling overseas, then the additional costs of their accompanying spouse may be allowable.

One-off visits

If an engineer has to visit a customer to check some equipment, for example, the travel costs are allowable. Employees who are required to visit customers or suppliers, attend training events, meetings or perform other visits expected of their role, then travel expenses are allowable.

Travel obligations

For those employees who are required to travel between work locations as part of their employment, travel costs are allowable.

Area employees

If an employee is responsible for an area over which they perform their duties, the travel costs within that area are allowable.

Travel between group employments

Where the employee is employed by a group of companies (holding company and 51% of subsidiaries), the directors or other employees may have to travel between locations to carry out their duties. Those employees are entitled to deductions for the cost of travelling to the other group companies for that purpose. The rules surrounding group companies are technical and complex, so it may be sensible to read through HMRC travel expenses temporary workplace guidance, if there is any doubt.

Level of reimbursement

If an employee is reimbursed excessively for their expenses, it will give rise to one of two situations:

• If the employer reimburses expenses above the level of expenditure incurred by the employee, then the excess must be treated as earnings and included in payroll.
• If the employer reimburses expenses for particularly lavish or extravagant travelling arrangements, it may result in a benefit charge on the employee.

  However, if the employee has incurred extra or additional expenses which have not been reimbursed by their employer, then the employee can claim relief. For example, if the employee has been reimbursed £150 towards a £200 train fare, the employee can claim tax relief on the excess £50. This is either done via the employee’s tax return under “employee expenses”, or, if the employee is not required to complete a tax return, they can claim relief on form P87, an excess expenses form.

Breaks in attendance or location

A break in attendance or location, however long or short, does not reset the clock. If the employee is returning to a previous place of work, time continues to run. This is because 24-months is the total calendar period, and not the actual amount of time the employee spends working at the location.

The 24-month rule clock can be reset provided there is a significant change in the commute or location. HMRC does not define what amounts to a significant change, so employers will need to determine this on a case-by-case basis. Resetting the 24-month rule only applies to limited companies that intend to be at a location or venue for over 24 months.

If this is the case, the employee can then revert to the 40% rule, which requires determination as to the length of time they will be away from that location in order for them to claim in the future.

HMRC 24-month rule & travel expenses rules FAQs

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Legal disclaimer

The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal or financial advice, nor is it a complete or authoritative statement of the law or tax rules and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.

Before acting on any of the information contained herein, expert professional advice should be sought.

Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law , Tax , Human Resources , Immigration & Employment Law .

Gill is a Multiple Business Owner and the Managing Director of Prof Services Limited - a Marketing & Content Agency for the Professional Services Sector.

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Non-executive Directors and travel expenses - HMRC changing the rules

28 june 2019.

It is very common for an organisation to meet the cost of travel expenses for non-executive directors (NEDs) to attend Board meetings and, where necessary, the cost of related accommodation and subsistence too. 

Whilst the NED may say that he or she is home based, HMRC are unlikely to accept that the NED’s home is a workplace. Furthermore, if all (or almost all) of the time that a NED spends working for an organisation is spent at the location at which the board meetings take place, HMRC will regard this location as a ‘permanent workplace’. Journeys between a home and a permanent workplace are ordinary commuting and the travel expenses attributable to such journeys (and any related accommodation and subsistence) are generally taxable. HMRC Booklet 490 includes an example under section 3.12.

What is changing?

Historically many public sector organisations have settled the tax due on NEDs' taxable travel and subsistence expenses by including it on their PAYE Settlement Agreement (PSA). PSAs have the advantage of being convenient but the disadvantage of being expensive; because the tax and national insurance contributions (NIC) payable by the public sector organisation under the PSA is calculated on a grossed-up basis (the effective tax rate for a 40 per cent taxpayer is touching 90 per cent). 

This treatment has, however, been withdrawn by HMRC from 6 April 2019. From that date the only items that HMRC is permitted to include in the PSA for a public sector organisation must be either:

• minor (in terms of the value of the item);
• irregular (in terms of the provision of the benefit or expense); or
• impracticable (to apply PAYE or apportion between the employees receiving the benefit).

The Department of Business, Energy & Industrial Strategy (BEIS) wrote to the bodies it oversees on 30 May 2019 including this instruction:

'Any payments made to non-executives and other office holders will now have to be paid through payroll, with tax and National Insurance deducted at source. 

'For cases where BEIS is responsible for paying fees and expenses, the default position is that the individual NED/office holder will pay the tax and National Insurance on any taxable expenses. 

'The policy sponsor directorate may choose to cover these costs but this is a decision for them and will need to be met out their directorate budget. 

'For cases where BEIS is not responsible for paying fees and expenses, individual organisations need to ensure that they are tax-compliant.'

What does this mean?

Each case of NED expenses should be closely reviewed to see if tax relief is available. If tax relief is not available, then:

• where the NED is reimbursed for these expenses the payment is treated as covering a pecuniary liability of the NED and is thus liable to tax and Class 1 NIC (employee’s and employer’s) via the payroll. When the expenses are reimbursed they should be placed through payroll within 14 days of the reimbursement or in the next payroll run to avoid the potential of penalties for incorrect RTI returns. The question then is does the payer gross up the payment so the NED receives the net they expended or not! If they don’t then the NED will be out of pocket;
• if the organisation arranges for the expenses directly, then these are reportable on form P11D and chargeable to Class 1A NIC. If the organisation places these amounts on the P11D then the NED will suffer the tax and the payer the Class 1A NIC. Again, the NED will be out of pocket if historically they did not pay the tax; and
• if the organisation is not in the public sector it may still be possible to include the whole cost in their PSA if it meets the criteria outlined above. For payroll items the PSA should be agreed with HMRC before the reimbursement is made.

As mentioned in our articles ‘ Non-executive directors’ fees – how to avoid mistakes ' and ‘ Non-resident directors of UK companies and the tax implications ’, it is also worth reiterating that fees for NED roles in the public and private sectors should generally be subject to tax and NIC through the payroll as NEDs are treated as officeholders (ie employees) for PAYE purposes.

What should organisations be doing now?

We would recommend all organisations check the position regarding NED expenses to see if the correct tax treatment has been applied. If historically the organisation has dealt with these expenses via a PSA, consideration should be given to whether this treatment can continue from 6 April 2019.

For those who have had their PSA removed, or don’t have one in place, then they should urgently make sure that any reimbursed expenses have been placed through payroll and the correct tax and NIC treatment applied. 

We understand that those covered by the Department of Business (BEIS) instructions were asked to confirm they had actioned the change to their PSAs by 14 June 2019. 

For those not covered by the BEIS instructions it is likely we will see more activity from HMRC in this area in the coming months. 

If you have any further questions regarding to payments to non-executive directors, please contact Susan Ball or Lee Knight.

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VAT road fuel scale charges from 1 May 2024 to 30 April 2025

Use these road fuel charges from 1 May 2024 on your VAT return, to account for private consumption of fuel on a business vehicle.

The VAT Road fuel scale charges will be updated from 1 May 2024. You’ll need to use the new scales from the start of the next prescribed accounting period, beginning on or after 1 May 2024.

You’ll need to work out the correct road fuel charge, based on your car’s CO2 emissions, and the length of your VAT accounting period. This will be either one, 3, or 12 months.

The flat rate values given in this guide apply to one individual, in connection with a specific vehicle, for the relevant accounting period.

CO2 emissions figure

You’ll need to check your car’s CO2 emissions figure online  if you cannot get this from your logbook.

If the figure is not a multiple of 5, round it down to the nearest multiple of 5.

• UK approval certificate

The CO2 emissions figure may also be specified, on either a:

• corresponding certificate of conformity, issued by a manufacturer in another member state

You can use one of these certificates to work out the car’s CO2 emissions figure, for the purposes of the valuation table.

If only one figure is specified in the certificate, use that figure.

If more than one figure is specified in the certificate, use the CO2 (combined) emissions figure.

If separate CO2 emissions figures are specified for different fuels, use the lowest figure, or the lowest CO2 (combined) emissions figure.

If the figure you arrive at is not a multiple of 5, round it down to the nearest multiple of 5.

If your car does not have a CO2 emissions figure

If your car is too old to have a CO2 emissions figure, you should identify the CO2 band based on its engine size. If its cylinder capacity is:

• 1,400cc or less, use CO2 band 140
• more than 1,400cc but less than 2,000cc, use CO2 band 175
• more than 2,000cc, use CO2 band 225 or more

Charges for more than one car

You’ll need to work out the fuel scale charge, if all of the following apply:

• you change car during the accounting period
• at the end of the period, you do not own, or have not been allocated, one of the cars
• the cars fall under different CO2 emissions figures in the table

To do this, work out how much of the accounting period you used each car for, and record this as a percentage of the accounting period. Apply this percentage to each road fuel scale charge, to get a total figure.

If the cars fall under the same CO2 emissions figures in the table, treat them as if they were one car.

Valuation table

The valuation table shows the new scale charges. These include VAT .

For more detail on how to use the table, read Schedule 2 of the VAT (Flat-rate Valuation of Supplies of Fuel for Private Use) Order 2013 .

VAT rate tables

The VAT rate tables show the VAT charged if you account for VAT on an annual, quarterly, or monthly basis.

Annual charges

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