When it comes to business travel, subsistence expenses can quickly add up. These expenses can include meals, lodging, and other incidental costs incurred while on the road. Fortunately, in many cases, these expenses can be reclaimed by the traveler or their employer. However, it’s important to understand the rules and regulations surrounding subsistence expenses to ensure that you’re eligible for reimbursement.
To start, it’s important to understand what subsistence expenses are. These expenses are defined as the cost of food and lodging while traveling for business purposes. In some cases, incidental expenses such as transportation costs may also be included. However, it’s important to note that not all expenses incurred while on the road are considered subsistence expenses and therefore may not be eligible for reimbursement.
Eligibility for reclaiming subsistence expenses can vary depending on a number of factors. These factors can include the purpose of the travel, the length of the trip, and the location of the travel. It’s important to understand these factors and how they impact your eligibility for reimbursement before submitting any expenses for reimbursement.
Understanding Subsistence Expenses
Subsistence expenses are a type of business expense that an employee or self-employed individual may claim to cover the cost of food, drink, and accommodation while on a business trip or working away from their usual place of work. These expenses are typically incurred when an employee or self-employed individual is required to travel for work purposes, such as attending a conference or meeting with a client.
In general, subsistence expenses are tax-deductible, meaning that they can be claimed as a business expense and reduce the amount of tax owed by the employee or self-employed individual. However, it is important to note that subsistence expenses must be reasonable and necessary for the business purpose, and any personal expenses must be excluded.
Employers may also reimburse their employees for subsistence expenses incurred while on a business trip. In this case, the reimbursement is not subject to tax and National Insurance contributions, as long as it meets certain conditions. For example, the expenses must be incurred wholly, exclusively, and necessarily in the performance of the employee’s duties.
Self-employed individuals and company directors can also claim subsistence expenses, provided that they are incurred wholly and exclusively for the purposes of their trade or profession. Partners in a partnership can claim subsistence expenses in the same way as self-employed individuals.
It is important to keep accurate records of all subsistence expenses, including receipts and invoices, as HM Revenue and Customs (HMRC) may request evidence to support any claims. Failure to provide evidence may result in the claim being disallowed, and potentially lead to penalties and interest charges.
Subsistence expenses can be a valuable way for employees, self-employed individuals, and company directors to reduce their tax liability and offset the costs of business travel. However, it is important to ensure that all claims are reasonable and necessary, and that accurate records are kept to support any claims made.
Eligibility for Reclaiming Subsistence Expenses
Employees are eligible to reclaim subsistence expenses if they meet certain criteria. The following entities are relevant when determining eligibility:
- Reclaim: The employee must have paid for the expenses out of their own pocket and not have been reimbursed by their employer.
- HMRC: The expenses must be allowable by HM Revenue and Customs (HMRC) for tax purposes.
- Reasonable: The expenses must be reasonable and necessary for the employee to carry out their job duties.
- Normal Place of Work: The employee must have a normal place of work, which is defined as a place where they spend a significant amount of time carrying out their job duties.
- Temporary Place of Work: The employee must be required to work at a temporary place of work for a limited period of time.
- Extended Period of Time: The employee must be required to work at a temporary place of work for an extended period of time, which is typically more than 24 months.
- Main Depot: The temporary place of work must be different from the employee’s main depot.
- Normal Working Day: The employee must be required to work at the temporary place of work for a normal working day, which is typically 10 hours or more.
Employees who meet these criteria may be eligible to reclaim subsistence expenses, such as meals, accommodation, and travel expenses. It is important for employees to keep accurate records of their expenses and to submit them to their employer in a timely manner. Employers should have clear policies and procedures in place for processing and reimbursing employee expenses.
Types of Subsistence Expenses
Subsistence expenses refer to expenses incurred by an employee while on a business trip or performing work-related duties away from the usual place of work. These expenses are usually reimbursed by the employer. The following are the types of subsistence expenses:
Food and Drink
Food and drink expenses refer to the cost of meals and non-alcoholic beverages that an employee incurs while on a business trip. The cost of alcoholic beverages is not usually reimbursed unless it is part of a meal or entertainment expense.
Accommodation
Accommodation expenses refer to the cost of hotel accommodation incurred by an employee while on a business trip. The cost of accommodation is usually reimbursed by the employer, provided it is reasonable and necessary.
Meals
Meals expenses refer to the cost of meals that an employee incurs while performing work-related duties away from the usual place of work. The cost of meals is usually reimbursed by the employer, provided it is reasonable and necessary.
Entertainment
Entertainment expenses refer to the cost of entertaining clients or customers while on a business trip. The cost of entertainment is usually reimbursed by the employer, provided it is reasonable and necessary.
Travel
Travel expenses refer to the cost of travel incurred by an employee while on a business trip. This includes public transport costs, taxis, parking, and tolls. The cost of travel is usually reimbursed by the employer, provided it is reasonable and necessary.
Staff Entertainment
Staff entertainment expenses refer to the cost of entertaining employees while on a business trip. The cost of staff entertainment is usually reimbursed by the employer, provided it is reasonable and necessary.
Process of Reclaiming Subsistence Expenses
When an employee incurs expenses while on a business trip, the employer can reimburse them for the cost of subsistence expenses. The process of reclaiming subsistence expenses involves submitting receipts and ensuring that the expenses are eligible for reimbursement.
To claim subsistence expenses, the employee must provide receipts for all expenses incurred. These receipts should include the date, location, and amount of the expense. The employer may also require the employee to provide additional documentation, such as a description of the business purpose of the trip.
VAT on subsistence expenses can be reclaimed by the employer if the employee provides a valid VAT receipt. The employer can then claim back the VAT on their next VAT return. However, if the employer is not VAT registered, they cannot claim back the VAT on subsistence expenses.
Tax relief may also be available for subsistence expenses. If the employee is required to work away from their normal place of work for a period of time, they may be entitled to tax relief on their subsistence expenses. The employee can claim this relief by completing a P87 form and submitting it to HMRC.
When reimbursing subsistence expenses, the employer should ensure that the expenses are incurred for business purposes. If the expenses are not incurred for business purposes, they may not be eligible for reimbursement.
The process of reclaiming subsistence expenses involves submitting receipts, ensuring that the expenses are eligible for reimbursement, and claiming back any VAT or tax relief that may be available. The employer should also ensure that the expenses are incurred for business purposes before reimbursing the employee.
Special Cases and Exceptions
While the rules for reclaiming subsistence expenses are generally straightforward, there are some special cases and exceptions to be aware of.
Overnight Stays
If an employee has to stay overnight on a business trip, they can claim for reasonable subsistence expenses such as meals and accommodation. The expenses must be necessary and reasonable for the trip, and not excessive.
Temporary Workplace
If an employee has to work at a temporary workplace, they can claim for subsistence expenses such as meals and drinks if they are working away from their usual place of work for a limited period. However, if the temporary workplace becomes the employee’s main place of work, they can no longer claim for subsistence expenses.
Scale Rates and Benchmark Rates
The Road Haulage Association and other organizations provide scale rates and benchmark rates for subsistence expenses. These rates are designed to simplify the process of claiming expenses by providing a fixed amount for each day of the trip. If an employee uses these rates, they do not need to provide receipts for their expenses.
Bespoke Amounts
If an employer provides bespoke amounts for subsistence expenses, they must ensure that the amounts are reasonable and reflect the actual costs incurred by the employee. The employer should also keep records of the expenses and the reasons for the amounts paid.
Rail Strike
If an employee is unable to use public transport due to a rail strike or other disruption, they can claim for reasonable subsistence expenses such as meals and accommodation. The expenses must be necessary and reasonable for the trip, and not excessive.
Favourite Sandwich Bar
If an employee chooses to eat at their favourite sandwich bar instead of a cheaper alternative, they cannot claim for the additional cost. The expenses must be reasonable and necessary for the trip.
Tax Invoices
If an employee incurs subsistence expenses of more than £25, they must obtain a tax invoice to support their claim. The invoice must show the date, the amount, and the name and address of the supplier.
Overall, it is important for employees to understand the rules and exceptions for reclaiming subsistence expenses to ensure that they do not incur any unnecessary costs.
Record Keeping and Compliance
In order to reclaim subsistence expenses, it is important to maintain accurate records. Failure to do so could result in non-compliance with HMRC regulations and potential fines.
Businesses must keep records of all expenses incurred, including subsistence expenses, for a minimum of six years. These records must be kept in a format that can be easily accessed and understood by HMRC.
It is important to note that subsistence expenses must be incurred wholly, exclusively and necessarily for the purposes of the business. Any personal expenses incurred cannot be claimed as subsistence expenses.
In addition to maintaining records, businesses must also ensure they are complying with corporation tax regulations. Subsistence expenses can be claimed as a deduction against corporation tax, but only if they meet the necessary criteria.
It is also worth noting that subsistence expenses incurred for marketing purposes, such as entertaining clients, are subject to stricter rules and may not be fully deductible.
Businesses must also be aware of the regulations surrounding the use of cookies on their website. If cookies are used to track user behaviour for marketing purposes, this may impact the deductibility of subsistence expenses.
Finally, engineers and partners must also be aware of any specific regulations that may apply to their industry or profession. It is important to seek professional advice if unsure about any regulations or compliance requirements.
Overall, maintaining accurate records and complying with HMRC regulations is essential when reclaiming subsistence expenses.
Frequently Asked Questions
How do I claim subsistence expenses?
To claim subsistence expenses, you need to keep a record of all the expenses you incur while on a business trip. This includes expenses such as meals, accommodation, and travel costs. You can then submit these expenses to your employer for reimbursement. It is important to keep receipts for all expenses incurred to support your claim.
What is the process for claiming VAT on travel expenses?
If you are a VAT-registered business, you can claim back VAT on travel expenses that you incur while on a business trip. To do this, you need to keep a record of all the expenses you incur and the VAT paid on those expenses. You can then claim back the VAT on your VAT return.
Can I claim VAT back on reimbursed expenses?
If your employer reimburses you for expenses that include VAT, you cannot claim back the VAT on those expenses. This is because your employer has already claimed back the VAT on the expenses.
What are the rules around claiming allowances for subsistence?
The rules around claiming allowances for subsistence vary depending on your employer’s policy and the tax laws in your country. In general, you can claim a subsistence allowance if you are away from your normal place of work on business. The allowance is designed to cover the cost of meals and other expenses you incur while away from home.
When is it appropriate to claim subsistence expenses?
It is appropriate to claim subsistence expenses when you are away from your normal place of work on business and you incur expenses such as meals, accommodation, and travel costs. You should only claim expenses that are reasonable and necessary for the business trip.
How are subsistence expenses taxed?
Subsistence expenses are generally tax-free as long as they are reasonable and necessary for the business trip. However, if the expenses are excessive or not necessary for the business trip, they may be subject to tax. It is important to keep accurate records of all expenses incurred to support your claim and avoid any potential tax issues.
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