All about business travel expenses
Travel expenses constitute a large part of all business expenses. In the UK, the calculation, reporting and reimbursement of travel expenses are covered by various pieces of legislation which entitle companies and members of staff to various forms of tax relief. To ensure compliance with these legal provisions and in order to be able to claim tax relief, employees have to comply with certain claims procedures and businesses often have to undertake complex accounting procedures. Monitoring, approving and reporting on business travel expenses can be challenging for businesses and for their employees. Here we present an overview of how travel expenses which are incurred when a member of staff travels from the workplace are defined, calculated and reimbursed and how the process can be facilitated.
What are travel expenses?
A member of staff may sometimes have to travel to a different place for the purpose of work on a temporary basis. They may travel for a short trip within the same town or city to visit another part of the business, to give a presentation at a university, or to work face-to-face with a client, for example. Equally, the employee may be required to travel for a business trip to London or to travel to a place in another country, which may last several days or weeks.
Travel away from home and the workplace generally results in additional costs which the employee has to pay and which they may, under certain circumstances, claim back from their employer. The employee may either pay for the costs they claim from their own personal funds and then be reimbursed following approval of an allowable expenses claim or may be paid in the form of a pre-agreed budget.
Employers in the UK have certain tax, National Insurance and reporting obligations when it comes to providing and reimbursing travel for members of staff, booking and reimbursing accommodation if an employee needs to stay away overnight, and covering meals and other subsistence costs. In the example of an employee giving a presentation at a university, other subsistence costs might include parking charges at the university, tolls on route, congestion charges if the university is located in part of London where emissions are regulated, or business phone calls to report back to the office.
An employee may also be required to report business expenses in their personal tax returns. HMRC allows specific types of expense incurred by employees during work-related trips to be deducted by their employer for tax purposes. To be eligible for this tax relief, employers must report employees’ travel to HMRC. These specific expenses must be reasonable and necessary. Information on allowable expenses and expenditure can be found on the HMRC website.
Travel, transport and other costs
Business travel expenses can be broken down into two broad categories: transport and other costs relating to the trip.
Transport costs include:
- Taxis, buses and trains to and around the site
- Season tickets
Related costs include:
- Road tolls and congestion charges
- Parking costs
- The cost of meals and tips
- Dry cleaning
- Business calls during the trip …
Receipts for each eligible expense that the employee has had to pay must be provided.
Only expenses that are reasonable and necessary to conduct the business activity are deductible. Travel expenses for personal reasons, as well as unreasonable, lavish or extravagant expenses or other expenses of a personal nature (such as buying a book or sightseeing unrelated to the work trip) are not covered.
Sometimes, an employee may have to travel for business, but may not take public transport (plane, train, bus). Mileage allowances allow employees to be compensated for any business related trips that they carry out using their own personal vehicle (car, bike, van etc.) and the associated costs. This does not generally include travel to and from the workplace, unless the employee is temporarily assigned to a different site but may be covered by the employer’s expenses policy if a home-based worker needs to use their personal vehicle to attend a meeting on-site.
How much an employee can claim depends on whether they own or lease the vehicle in their own name, or whether the vehicle is owned or leased by the company.
HMRC publishes tables of approved mileage rates depending on the type of vehicle and the number of miles covered.
|2012 onwards||First 10,000 business miles in the tax year||Each business mile over 10,000 in the tax year|
|Cars and vans||45p||25p|
Many employers have established or considered initiatives to encourage their employees to travel to work by bicycle or other sustainable methods of transport. Lending or hiring bikes for employees for this purpose does not count as an expense or benefit as long as they are available to all employees and are used mainly for getting to and from the workplace.
Working from home
The COVID-19 pandemic led to significant changes to businesses’ working practices to protect the health of their employees and members of the public. For two years, many standard business trips were cancelled, as employees transitioned to working from home and travel costs fell. Many office-based workers have continued to work from home, even as the restrictions on travel were lifted. However, certain journeys, including to and from the workplace for meetings or other obligations that cannot be met remotely, are still necessary.
Depending on the company’s expenses policy, the employer may cover the cost of this travel and may also cover certain other expenses related to working from home. Home-working expenses which may be claimed back may include any equipment, services or supplies used that the business provides to its employees, such as computers, office furniture, internet access and stationery, as well as additional household expenses such as electricity, gas and water incurred by working from home.
Businesses are exempt from reporting or paying tax on the cost of these expenses on the condition that the equipment, services or supplies are only used for business purposes, or any non-work use is insignificant.
Overview of business-related meal expenses
HMRC allows for subsidies on meal allowances, overnight rates, and travel expenses. Although this is a complex area of legislation, an overview of the allowances currently applicable within the UK is published by HMRC.
|Minimum journey time||Maximum meal allowance|
|15 hours (and ongoing at 8pm)||£25|
Covering employees’ daily costs
Companies with employees who regularly travel may set a daily budget per employee, known as a “scale rate payment”, a “subsistence payment” or a “per diem”. As long as an employee stays within this rate, the employer does not need to go through every invoice and approve every transaction for meals, accommodation and other subsistence costs. Some companies with employees who travel often may also agree a fixed rate with HMRC in order to facilitate this process and optimise their costs.
The amount of the HMRC per diem, which falls within business travel expenses and is therefore exempt from tax, depends on the destination the employee is travelling to and the cost of living in that location.
For example, if an employee is obliged to travel for business reasons to Lyon in France, they will be eligible for a scale rate payment of €122 for accommodation (known as the “room rate”), €25.50 for lunch and €43 for dinner. Should the same employee have to travel to Corfu in Greece, they would be eligible for a scale rate payment of €92.50 for accommodation, €28 for lunch and €43 for dinner. Other costs may also be covered depending on the nature of the expense.
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