Travel subsistence is often a very grey area within HMRCs rules and regulations so it is important to understand exactly what you can reclaim without incurring a tax penalty. These should be carried out in the same manner as any other expense claim which means this only applies to costs which are wholly and inclusively in the interest of the business which can be backed up by physical evidence.
Approved amount for subsistence paid to lorry drivers
There is a tax-free allowance on claiming subsistence for the night. If there is a sleeper cab present your maximum claim is lower as the accommodation costs will be proportionately lower, which means the tax-free allowance is also lower as a result. If the employer knows that the driver uses the sleeper cab they should pay (free of tax) only what represents a reasonable reimbursement of:
- Evening meal and breakfast
- Washing facilities
- Upkeep of bedding in the cab
The tax-free amount or ‘scale rate’ is calculated on a yearly basis in January, the maximum amount of tax-free expenses a driver can claim is shown below:
|Year ended||Payment per night||Sleeper Cab Rate|
|31 December 2013 and onwards||£34.90||£26.20|
|31 December 2012||£33.85||£25.40|
|31 December 2011||£32.20||£24.15|
The published tax-free allowances can be paid to employees without the requirement to produce receipts. If the employer wishes to use the published scale rate, then these rates are the maximum that they can pay without attracting any tax and national insurance liabilities.
Must a company pay its drivers expenses?
No, a company is not required to cover any of its employee’s expenses, but would probably find it quite difficult to retain good quality drivers if it did not.
Each company will determine its own driver pay rates and expenses policy based on what is affordable, what is fair and what is ‘normal’ in the industry. If you have a particularly generous competitor poaching your drivers – that might also have an impact on what you cover for your own drivers.
Must a company pay driver expenses at the rate published by HMRC?
No. HMRC’s published rates are the maximum a company is allowed to pay tax-free. A company may pay more (which must be taxed) or less if they choose.
Where the employer pays below the tax-free allowance
The employer can pay less than the published rate – it depends on the individual company policy. HMRC is not saying that these rates are mandatory, only that these are the maximum rates that can be paid without tax and national insurance, and without the need to keep receipts.
Can I claim tax relief on my expenses if my employer reimburses less than I spend??
Yes. You can claim tax relief on the proportion of your costs not reimbursed by your employer. You would need to keep detailed records and copies of all receipts to evidence the amount that your employer has ‘underpaid’.
Claims under £2,500 can be made in three ways:
- On your self assessment tax return if you have to submit an annual form
- By completing a P87 Tax Relief For Expenses of Employment Form, this can be printed and posted or you can complete one online through your government gateway
- By calling HMRC Income tax HELPLINE on 0300 200 3300
Claims over £2,500 can only be made through sef assessment.
Where the employer pays above the tax-free allowance
Any claims above the allowable amount will need to have the excess amount ran through PAYE as these are subject to tax, however, there may be some exceptions.
Any claims in excess of the allowance could be considered as a reasonable reimbursement despite the costs exceeding the tax free allowance; providing all the receipts are present, the expense is wholly and exclusively business-related and this is claimed via an expense form. Say the lorry broke down or temperatures dropped to a point that it was not comfortable to stay in the can – reasonable hotel expenses could be claimed.
However, if you choose to stay at a 5 star hotel when there was a cheaper option available HMRC may disallow any claims in excess of the allowable amount; declaring that this was a personal choice which was not in the interest of the business – which would then become a taxable benefit.
The amounts shown in the table above relate to the allowance for nights away from home based in the UK. They may not be appropriate for overnight subsistence on continental journals where costs may vary between countries. If your costs are proportionately higher in some countries you may be able to agree a higher rate with HMRC providing you have fully documented evidence of the usually reasonable costs.
These additional costs may be due to currency conversion, multiple showers in hotter climates, bottled water and secure parking (there should be a risk assessment to protect the vehicle, load and the driver).
Any new rates must be confirmed by HMRC, you should not allow a higher rate without official approval.
Incidental overnight expenses
The definition: These are non-business expenses incurred while travelling overnight on business, providing that they are intended for the well-being and personal nature of the employee. Some examples are shown below
- Buying newspapers (although this is not usually an allowable expense it can be a connection to home life for an employee, especially if they are working overseas)
- Paying for laundry
- Phoning home
Even so, these claims must have documentation to back them and must be justifiable.
How much you can claim:
On expenses up to £5 per night (£10 for travel outside of the UK)
- Providing your expenses are less than £5 per night you can claim for this expenses without incurring a tax penalty. You do not need to report this on a P11 and are not required to pay Tax and NI on this. This claim is in addition to the tax free allowance shown in the table above.
On expenses over £5 per night (£10 for travel outside of the UK)
- The initial £5 (or £10) will still remain tax-free, however, any amount paid out above this threshold will need to be added to your gross earnings as this is subject to PAYE. You are also expected to report this on a P11 benefits form.
Sources: www.hmrc.gov.uk or www.rha.uk.net
I’m not a lorry driver but I am paid an overnight rate when I work away from home. Is this also tax-free?
No, I’m afraid not!
Overnight allowances are typically part of the taxable pay for consultants, management and employed staff. Hotels, food and incidental expenses are usually reclaimed from the employer which means that other than having to work from home – you are not inconvenienced in the same way. If you are paid an overnight rate – this is part of your taxable income and will be subject to tax and National Insurance along with any other taxable pay.
There is no equivalent rate to the tax-free overnight allowance for lorry drivers – for other members of staff who are expected to work away from home.