A guide to employee travel expenses and reporting requirements
Managing employee travel expenses can feel complex. However, the rules are clearer than many employers realise. Indeed, certain travel and subsistence costs do not need reporting at all. Therefore, understanding the exemptions can save valuable time and reduce administrative pressure.
When reporting is not required
In many cases, no reporting requirement applies because an exemption covers the cost. Specifically, this includes reimbursed costs for business travel. Furthermore, subsistence falls within the same rules. Subsistence typically covers:
- Meals during business travel
- Parking charges
- Tolls and congestion charges
- Business phone calls
- Other necessary travel costs
Using HMRC scale rates
As an alternative to reimbursing actual costs, employers can use HMRC’s benchmark scale rates. Alternatively, they may use an approved bespoke scale rate. However, bespoke rates must be agreed with HMRC in advance. Fortunately, where a scale rate arrangement applies, no specific reporting requirements exist. Consequently, this approach can simplify payroll administration considerably.
Reimbursing more than necessary costs
Employers must take care when reimbursing employee travel expenses generously. Indeed, anything above the necessary cost counts as earnings. Therefore, employers must add the excess to the employee’s other earnings. As a result, PAYE and Class 1 National Insurance will apply. Ultimately, accurate record-keeping helps avoid unexpected tax liabilities.
Private travel between home and work
Generally, no tax relief applies for ordinary commuting. Specifically, travel between a permanent workplace and the employee’s home is private travel. However, the tax treatment depends on two key factors:
- Who arranged the transport
- Who paid for the journey
Therefore, employers should carefully consider these points before settling any costs.
Exempt categories of travel
Helpfully, several types of travel qualify for specific exemptions. For example, the following may be exempt:
- A works bus service
- Certain disability-related travel
- Taxis after occasional and irregular late-night working
- Bicycles and cycle safety equipment
- Travel disrupted by industrial action on public transport
Staying compliant
Above all, employers should regularly review their policies on employee travel expenses. Moreover, clear procedures protect both the business and its workforce.
How we help
Unsure how the rules apply to your business? Get in touch with our team today. Together, we will ensure your travel and subsistence policies remain fully compliant.
