On The Road Again: We Go The Distance To Explain Employee Travel Expenses
Two things unite every business traveller – the need to get business done, and the employee travel expenses they can claim for doing it. This post will explain what they can claim…
There are hardly any straight answers to the apparently simple question: “What employee travel expenses can be claimed?” In this brief post, we’ll highlight some things you need to be aware of, and where you can find definitive answers. Let’s start with the obvious…
What travel expenses are reimbursable?
It’s a simple list, and looks like this:
– public transport
– own-car mileage allowance
– hotel accommodation for overnight trips
– food and drink
– congestion charges and tolls
– parking fees
– business phone calls and printing costs
Refunding the cost of public transport tickets would appear to be straightforward enough, wouldn’t it? Well, it would if there were no variables. But you’ll need to lay down a company policy about grades of tickets. For example, are any employees allowed to travel first class rather than standard? If so, who? Make that plain up front.
Do I have to pay my employees for mileage?
Strictly speaking, no. But if you don’t, you’ll soon find talented people finding excuses not to go, or jumping ship entirely. But why wouldn’t you pay them for the necessary journeys? They’re a legitimate business cost, just like any other. What they’re not able to claim is travel from home to work – unless you’ve assigned them to a temporary workplace away from the normal base. (However, if the task can be accomplished without travelling at all, consider the benefits of that. No wasted and unproductive time sitting in traffic jams, smaller carbon footprint…)
What should I pay my employees for mileage?
Again, there’s no straight answer. HMRC has set a figure of 45p per mile – but that’s only for cars and small vans, and then only up to 10,000 miles a year. Above that, the figure drops to 25p per mile. Travel by motorcycle attracts a lower rate and doesn’t change regardless of distance travelled. Cyclists can claim too. There’s even a figure for cyclists travelling more than 10,000 miles a year – but hey, if your employees a cyclist with the time to do more than 10,000 business miles a year on a bike, they’re not adding much value to the business, are they?
Are employee travel expenses taxable?
Well, yes – and at the same time, no. The fact is that all income received by employees is taxable, but legitimate expenses are subject to tax relief, so tax doesn’t have to be paid. However, if an employer gives an employee £100 with instructions to travel by train from A to B, for example, and the fare turns out to be £87, then the employee should pay tax and National Insurance on the remaining £13, unless it is given back to the employer. Employees who are not paid expenses may be able to claim tax back, so long as they’re taxpayers. If an employer pays or reimburses the cost of commuting, they’ll have to deduct tax and National Insurance contributions.
Can employees claim food and drink on their expenses?
Bet you’ve guessed the answer already. Yup. It depends. In the UK, Her Majesty’s Revenue and Customs says you can claim back expenses only that are ‘wholly and exclusively’ for the purposes of trade. Eating and drinking aren’t wholly about business (we all need to eat), which makes this something of a grey area. In some situations, claiming for food and drink is allowed as subsistence, so long as it’s outside your normalworking routine – anovernight business trip, for example. To offset income and deduct business expenses, the spending needs to be ordinary and necessary for doing business. … In general, 50% of meals and entertainment expenses are deductible. Rules vary slightly for those in employment, those working for their own limited company, and sole traders.
We hope this post starts to shed light on the complicated area of employee travel expenses – but the rules are such that you need more expert guidance than we’re able to offer. To get clarity on your own situation, we recommend exploring the story in full in HMRC’s own words at this link, where a comprehensive document can be found.
There can be little doubt that the world of employee travel expenses is complex, and a place in which you could very quickly become lost when it comes to tracking who’s spending what, with whom, and why. To help with navigating through the labyrinth you need an intuitive, easy-to-use, and cost-effective tool; you need ExpenseOnDemand.
Our simple interface turns recording, approving, and paying expenses into child’s play, and is the perfect antidote to the complexity of the rules and regulations. There’s only one sure way to discover how our app can help – and that’s be using it. Start at this link. We promise we won’t break the bank; our objective in business is to make your business better without making either of us poor – and because we do that, we make our business better too. You have nothing to lose but a big financial headache (so big it could even be a migraine…)
Author: Sunil Nigam
CEO & Founder