Business travel is a regular part of working life for many employees across a wide range of occupations and industry sectors. When travelling on behalf of an employer, it is usual for employees to incur travel and subsistence expenses related to that business travel which they would not have otherwise acquired.
Are employers treating those expenses correctly for taxation purposes? Tax preparation specialist David Redfern, director of DSR Tax Claims Ltd, explains which common business travel expenses are deductible and under which circumstances...
Whether the travel is incurred by managers needing to attend meetings at head office, construction staff working away from home on large-scale building projects or salespeople working on the road, business travel rarely comes without associated expenses.
As far as HMRC is concerned, business travel expenses relate to the actual costs of travel plus associated subsistence costs and any associated necessary expenditure relating to the business travel.
Deductible subsistence expenses related to business travel include the cost of meals which were purchased as a necessity whilst the employee was at a temporary workplace that the employee wouldn’t have required were it not for that travel – so a sandwich purchased while on business travel would be deductible, but if instead, the employee had made a sandwich to take with them on their business travel, those costs wouldn’t be classed as a necessary expenditure.
The costs of accommodation and meals when the travel requires an overnight stay are also allowable, even where that employee is required to stay away from home for a longer period of time”. It is not necessary for an employer to deduct any potential savings to the employee such as the cost of food or accommodation they would have incurred at home.
A number of incidental expenses are considered deductible when incurred as a result of business travel, including vehicle hire expenses, toll fees, congestion charges and parking costs. As long as the costs were sustained as a result of qualifying travel, employers are able to reimburse these costs without treating them as taxable income.
However, there are certain costs which are not allowable. Expenses incurred as a result of the personal circumstances of the employee are not considered deductible. This means that should an employee be required to pay for kennel fees or additional child care costs resulting from the business travel, such expenses are excluded from consideration.
Additionally, any expenditure which is not directly attributable to the journey, such as phone calls or laundry, is also not attributable although employers may reimburse a fixed amount without it being considered taxable income. For business travel within the UK, that fixed amount is £5 per night, provided that the whole period away from home is considered a qualifying period.
Expenses related to work-related training are treated in a similar vein, providing the employee is undertaking training for the performance of their duties of employment.
The training must relate to the employee’s current employment or a related employment and isn’t allowable if the intention of the training is to reward the employee or if the training relates to an activity that would be considered a leisure or recreational activity – the training has to be purely business-related, although it can be delivered in a number of ways including online. There is no tax relief for the costs of any training self-financed by employees where the cost is not reimbursed by the employer. As with business travel, incidental overnight expenses are allowable.
Whether incurred as a result of business travel or qualifying work-related training, when determining whether the expenses are allowable, a further consideration should be made. The expenses should be reasonable – HMRC will reject any expenses which it considers to be unduly lavish – and they should be purely related to activities performed as a part of employment duties.