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His Majesty’s Revenue and Customs (HMRC) is the UK’s tax authority – responsible for collecting taxes, administering tax laws and overseeing the country’s tax and customs systems.
It is responsible for both personal and business tax regulations, including setting the rules related to corporate travel and defining which employee expenses can be fairly and legally recompensated.
However, many businesses and employees still struggle to understand exactly what HMRC considers an appropriate travel expense.
That’s why the corporate travel experts at Good Travel Management have put together a comprehensive guide on HMRC travel expenses – including the guidelines and criteria for making an expense claim and the types of costs HMRC covers.
What Are HMRC Travel Expenses?
HMRC has rules and guidelines around allowable travel expenses that businesses can deduct from their taxable income.
These guidelines also promote fairness in employee benefit and reward structures and prevent employers from offering tax-deductible benefits to employees.
The main categories of travel expenses that can be reclaimed from HMRC include:
- Mileage allowance for business travel in an owned vehicle.
- Public transport costs for business travel, such as train, bus or taxi fares.
- Parking fees and tolls incurred during business travel.
- Accommodation and meals when staying away from home, overnight, for business purposes.
- Air travel and other transportation costs for business trips.
- Fuel costs for company vehicles used for business.
The specific rates and eligibility criteria for these travel expense claims are set by HMRC and can vary depending on factors like the mode of transport, the purpose of the travel and the employee’s role within a company.
Employees and self-employed individuals need to keep detailed records of their business travel expenses.
They must follow HMRC’s guidelines to accurately claim these allowable deductions when filing their tax returns.
Why Are HMRC Travel Expenses Important?
There are several key reasons why employers need to expense employee travel in line with the HMRC travel expense guidelines:
- Tax Compliance: Properly accounting for and claiming allowable travel expenses helps employers comply with HMRC tax regulations. Failure to follow the rules could result in tax penalties and fines for the employer.
- Employee Compensation: Reimbursing travel expenses within HMRC guidelines ensures employees do not have to pay additional taxes on the reimbursements. This helps attract and retain talented employees by providing a quick and fair compensation process to avoid leaving staff out of pocket.
- Cost Control: The HMRC-approved mileage rates and expense limits provide a framework for employers to manage and control travel costs. This helps keep travel expenses reasonable and in line with regulatory expectations.
- Record-Keeping: The HMRC guidelines require employers to maintain detailed records of all reimbursed travel expenses. This documentation is essential for tax audits and demonstrating compliance.
- Fairness and Consistency: Adhering to the HMRC rules means employees are treated fairly and that travel expense policies are applied consistently.
- Business Deductions: Accurately expensing employee travel as per HMRC rules allows employers to claim legitimate business deductions on their tax returns.
What Are Legitimate HMRC Corporate Travel Expenses?
There are clear guidelines and expectations when it comes to corporate travel expenses, that businesses must follow to remain compliant and provide quick and accurate compensation to employees. These include:
- Approved Business Mileage Rates: The following is the amount that can be expensed by employers per mile of travel, depending on the type of privately owned vehicle.
- Cars/Vans: 45p per mile for the first 10,000 miles, 25p per mile thereafter.
- Motorcycles: 24p per mile.
- Bicycles: 20p per mile.
- Public Transport Costs: Employers can reimburse the actual costs of train, bus, taxi and other public transport used for business travel.
- Accommodation and Meals: Employers can reimburse reasonable costs for overnight accommodation and meals when employees are required to travel for business.
Find out more about these reimbursable expenses in our helpful guide!
- Company Vehicles: Employers can claim capital allowances and running costs for company vehicles used for business.
- Record-Keeping: Employers must maintain detailed records of all reimbursed travel expenses.
- Employee Advances: Employers can provide employees with advances to cover anticipated business travel costs. This may be in the form of Per Diem allowances.
- Reporting Requirements: Employers must report certain travel expense reimbursements on employees’ annual tax returns (P11D).
Which HMRC Travel Expenses Are Non-Refundable?
There are certain travel expenses that HMRC considers non-refundable or non-deductible. These include:
- Commuting Costs: The cost of travelling from home to a permanent workplace is considered a personal expense and is not tax-deductible.
- Fines and Penalties: Any fines or penalties incurred during business travel, like speeding tickets or parking tickets, are not deemed acceptable deductible expenses.
- Expenses for Private/Personal Trips: If a business trip includes personal entertainment or detours, any related expenses are not eligible for tax relief.
- Costs for Family Members: Additional expenses incurred for bringing a spouse, partner or other family members on a business trip are generally not deductible.
- Excessive or Lavish Expenses: HMRC may deem certain travel expenses as unnecessary – for example, if they are too extravagant or beyond what is needed to complete the business purpose. These are therefore not deductible.
For more information on exactly what is and isn’t deemed a deductible travel expense, check out our reimbursable expenses guide.
HMRC Travel Expenses Example
Below is an example of how HMRC guidelines might be applied to corporate travel:
A Sales Representative from ‘123 Insurance’ is travelling to Edinburgh from London to meet with a prospective client.
They catch the train from London in the morning – paying the fare on their personal credit card and keeping the ticket receipt to be reclaimed upon their return.
Upon arriving in Edinburgh, they order a taxi to the office – again paid for on their own card, keeping the receipt. The meeting finishes in the early evening and it is deemed too late for the employee to take the long train home. They check into a hotel, which has been pre-paid using a company card.
The employee was afforded £40 as a Per Diem allowance for lunch and dinner, for which they also kept the receipt.
The next morning, they leave the hotel, order a taxi to Edinburgh train station and travel back to London – again, paying on their personal card and keeping the receipts.
When they return to the office the next day, all receipts are filed with the accounts department to be reclaimed as travel expenses – and the business deducts all expenses (train, taxi, hotel, food and refreshments) from its taxable income as legitimate business expenses.
Working with a Travel Management Company
Working with a travel management company (TMC) makes it effortless to manage compliant and cost-effective travel expenses.
Corporate Travel Management (CTM) experts transform your corporate travel, helping you develop your travel framework, including expense management and tracking, security and compliance and reporting.
They also work make light work of corporate travel arrangements, so you can focus on high-value business tasks.
Below are our top tips for working with a TMC to get the most out of your relationship and remain compliant with HMRC tax and expense guidelines when managing corporate travel:
- Establish Clear Policies: Work with the TMC to develop and document company travel expense policies, aligning them with HMRC guidelines. Clearly define what constitutes eligible business travel and the approved expense limits.
- Provide HMRC Training: Work with a TMC that is well-versed in the latest HMRC rules and regulations regarding travel expenses. Consider providing joint training sessions between the TMC and the business.
- Maintain Detailed Records: Require the TMC to provide comprehensive, itemised expense reports for all booked travel. Insist on receiving copies of all receipts and supporting documentation.
- Implement Robust Approval Processes: Establish a formal approval workflow for all travel bookings and expense claims. Designate authorised approvers who are familiar with HMRC requirements.
- Regularly Review and Audit: Conduct periodic reviews of the TMC’s expense reporting and perform random audits of travel expenses to maintain adherence to policies and HMRC guidelines.
- Communicate and Collaborate: Maintain open communication with the TMC, discussing any changes in HMRC rules or internal policies. Collaborate closely to address any issues or concerns that arise during the claims process.
Ready to transform your business travel strategy? Good Travel Management’s Levers help us personalise your path to cost-efficient, compliant and traceable corporate travel.
Frequently Asked Questions (FAQs)
Q: How Do I Claim 45p Per Mile?
A: To claim the HMRC-approved 45p per mile rate for business mileage, keep a detailed mileage log, calculate eligible business miles driven, multiply the total by 45p, report the claim on a tax return and maintain supporting documentation to comply with HMRC guidelines and create a valid, compliant mileage expense claim.
Q: What Travel Expenses Can I Claim as Self-Employed?
A: As a self-employed individual, you can claim HMRC-approved travel expenses including vehicle mileage, public transport costs for business travel and accommodation and meals when staying overnight for business. Thorough record-keeping is essential to substantiate claims.
Q: What Is the Minimum You Can Claim on Travel Expenses?
A: There is no official minimum amount for HMRC travel expense claims, as even relatively small costs like parking fees or public transport fares should be accurately recorded and claimed if the travel was for genuine business purposes. The key is maintaining detailed records and following HMRC guidelines to make sure all legitimate expenses are properly deducted.
Q: What Is The 24-Month Rule For HMRC?
A: The HMRC 24-month rule states that if an employee is expected to work at a temporary workplace for less than 24 months, the travel expenses to that workplace can be claimed as tax-deductible. However, if the workplace ends up being used for more than 24 months, the expenses become taxable from the start.