In This Article
- What is a Subsistence Rate?
- What is the Purpose of Subsistence Rates?
- When do HMRC Subsistence Rates Apply?
- HMRC Approved Subsistence Rates (2024)
- Key Conditions for HMRC Subsistence Rates
- How to Report and Reclaim Subsistence Payments
- Top 3 Tips for Employers
- Common FAQs
- Why use a Corporate Travel Management Company?
What is a Subsistence Rate?
HMRC Subsistence Rates are guidelines set by Her Majesty’s Revenue and Customs (HMRC) that define the daily allowance employers can provide to employees for meals and accommodation while travelling for business purposes. These rates help simplify expense reporting and avoid any unnecessary taxation for employees.
The term ‘subsistence’ refers to expenses incurred by an employee for food, drink, and other necessary costs during business travel. However, these costs must be reasonable and directly related to the work trip.
Good Travel Management have provided a detailed guide to understanding HMRC Subsistence Rates, how they work, and when they apply.
What is the Purpose of Subsistence Rates?
HMRC provides these rates to make it easier for employers to pay employees a fixed allowance for their meals and accommodation whilst travelling on business. By following these rates, employers can reimburse employees without the need for them to provide detailed receipts for each meal, and the payments will not count as taxable income.
When do HMRC Subsistence Rates Apply?
HMRC subsistence rates will apply when the following happens:
- An employee is travelling away from their normal place of work for business purposes.
- The business travel requires them to stay away for a significant part of the day or overnight.
- The employee incurs extra costs, such as meals or accommodation, due to this travel.
Remember, subsistence rates can only be made tax-free if the trip meets these criteria, and if they comply with HMRC’s qualifying conditions.
HMRC Approved Subsistence Rates (2024)
HMRC provides standard meal allowance rates for employees who are required to work away from their usual place of work. As of 2024, the rates are as follows:
Day Rates (For Meals)
Breakfast Allowance: Up to £6.00
This is eligible if the employee leaves home before 6:00 AM and buys breakfast away from their home or workplace.
One Meal Allowance (5 hours): Up to £5.00
Applicable if the employee is away from their normal place of work for at least 5 hours and incurs the cost of a meal.
Two Meal Allowance (10 hours): Up to £10.00
This applies when the employee is away for at least 10 hours and buys two meals (e.g., lunch and dinner).
Late Evening Meal Allowance: Up to £15.00
This is available if the employee is required to work after 8:00 PM and buys a meal as a result.
Overnight Rates (For Accommodation)
UK Overnight Stay: Up to £25.00 for incidental overnight expenses.
This applies when the employee is required to stay overnight for business purposes within the UK.
International Overnight Stay
Rates vary by country and typically cover both meals and accommodation. HMRC provides detailed country-specific rates for international travel.
Key Conditions for HMRC Subsistence Rates
To claim these rates tax-free, the following conditions must be met:
Receipts
Employers must retain proof that the employee incurred the expenses. However, receipts are not mandatory for meal allowances if the flat-rate subsistence was used.
Business Journey
The travel must be business-related and outside of the employee’s normal working area. Routine commutes to regular places of work do not qualify for this.
Maximum Amounts
Employers can pay employees subsistence amounts up to the HMRC’s approved rates without the payments being taxed. Payments exceeding these rates may be taxable as additional income.
How to Report and Reclaim Subsistence Payments
For Employers
If the subsistence payments fall within HMRC’s approved rates, there is no need to report them on a PAYE Settlement Agreement (PSA) or through payroll. If they exceed the rates, they must be reported as taxable benefits.
For Employees
Employees should submit claims for expenses with appropriate receipts to their employers. If an employee spends more than the provided subsistence rate, they may still claim tax relief on the difference, provided they can prove the extra cost was necessary for business purposes.
Top 3 Tips for Employers
- You should be implementing a clear expense policy that aligns with the HMRC guidelines.
- Make sure employees understand what qualifies as a business expense and how to claim it back.
- Keep proper records of all expense claims to avoid any issues during an HMRC audit.
Common FAQs
Can employees claim subsistence if they work from home?
No, employees working from home cannot claim subsistence allowances unless they travel for business away from their home for an eligible journey.
Are travel expenses included in subsistence rates?
No, travel expenses such as train or car costs are separate and can be claimed under HMRC’s travel expense guidelines.
Can I claim subsistence without receipts?
Yes, you can claim subsistence without receipts in certain situations, but it depends on your employer’s policy and the guidelines set by HMRC.
What is a subsistence allowance on a payslip?
A subsistence allowance on a payslip is an amount paid to an employee to cover the costs of meals, accommodation, and other incidental expenses incurred during their business travel. This allowance is supposed to reimburse employees for necessary costs while working away from their usual place of work.
What is a hardship allowance?
A hardship allowance is additional compensation provided to employees who work in difficult or challenging environments, often in international or remote locations.
The hardship allowance helps make this type of work more attractive and fair by offering extra financial compensation for the challenges and discomfort of the work types.
Is daily subsistence allowance taxable?
The Daily Subsistence Allowance (DSA) can be tax-free if it meets certain conditions, but it depends on the local tax authority’s rules.
Under HMRC Rules in the UK
The DSA is not taxable if,
- The payments are for actual business-related travel.
- The allowance is within HMRC’s approved subsistence rates (for meals, accommodation).
- The employee is traveling away from their normal place of work for business purposes.
If the allowance exceeds HMRC’s rates, the excess portion may be treated as taxable income, and both the employer and employee may be required to pay tax.
What is the meaning of Diem?
The word ‘diem’ is Latin for ‘day.’ It is commonly used in phrases like per diem, which translates to per day. Per diem refers to a daily allowance or rate provided to cover expenses, such as meals or accommodation, typically during business travel.
Why use a Corporate Travel Management Company?
A corporate travel management company can help with subsistence rates by offering specialised services to manage corporate travel more efficiently. This includes,
Policy Compliance
Good Travel Management ensure that travel bookings and expenses align with the company’s travel policy and adhere to the applicable subsistence rate guidelines.
Expense Tracking
They can provide systems for tracking and reporting employee expenses, making it easier to document eligible costs and ensure they meet the set subsistence rates.
Cost Control
By centralising travel bookings, Good Travel Management can help employers control costs related to accommodation and meals, ensuring that they stay within approved subsistence rates and avoid overspending.
Simplified Administration
We handle the complexities of managing travel logistics and expense claims, reducing the administrative burden for employers and ensuring that employees receive the correct allowances for their trips.