Good news for both employers and employees as Chancellor reduces the monthly headache of expense claims

Wed 22 Nov 2017

The Chancellor has announced measures to reduce the administrative burden for employers in respect of checking employees’ expenses claims.

From April 2019 employers will no longer be required to check receipts when reimbursing employees for subsistence using HMRC approved benchmark scale rates for UK and overseas travel.

This announcement does not apply where the employer reimburses actual amounts expended or reimbursements made under agreed bespoke scale rates and industry-wide rates.

HMRC benchmark rates for UK travel

A common form of scale rate payment is where employers make a payment for subsistence incurred on UK business journeys in line with the HMRC benchmark rates, as set out in the Income Tax (Approved Expenses) Regulations. An advantage is that it is not necessary to receive prior approval from HMRC and, where the conditions are satisfied, payment within the rates can be made without deduction of PAYE income tax and Class 1 NICs.

The following bench mark rates cover UK travel and can be used to reduce administration and expense claims. For example, the UK rates are set as follows:

Where a scale rate of £5 or £10 per day is paid and the journey lasts beyond 8pm, HMRC permit a supplementary payment of £10 for that day to cover the additional expenses incurred as a result of working late.

These published rates are the maximum that can be paid free of income tax and NICs. If a higher payment or expense reimbursement is made without agreeing a bespoke scale rate with HMRC (see EIM30250), any excess over the published rate should be subject to PAYE income tax and Class 1 NICs.

Special rules for overseas travel

For travel overseas there are similar rules at section 289A Income Tax (Earnings and Pensions) Act 2003 that allows an exemption for payments within the published benchmark rates which can cover a wider range of costs, including local travel and accommodation rates.

The existing concessionary accommodation and subsistence overseas scale rates will from April 2019 be placed on a statutory basis, to provide greater certainty for businesses. HMRC’s guidance sets out the current qualifying conditions for using the benchmark scale rates:

• the travel must be in the performance of an employee’s duties or to a temporary place of work, on a journey that is not substantially ordinary commuting; and

• the employee should be absent from his normal place of work or home for a continuous period in excess of five hours or ten hours; and

• the employee should have incurred a cost on a meal (food and drink) after starting the journey and retained appropriate evidence of their expenditure.

Where Benchmark scale rates are paid, the employer should ensure that although receipts for expenditure will no longer need to be checked the employer will still be responsible for ensuring that the payments are in respect of qualifying business travel.

For further information please contact Linda Broomfield, Senior Manager – Employment Tax – linda.broomfield@mazars.co.uk or your local Mazars Employment Tax specialist.