What can I claim for travel and subsistence?

Travel and subsistence is a little bit of a can of worms (or even spaghetti)! The rules for self employed versus employees and company directors don’t always line up, so if you have recently moved from one employment structure to another, you might find yourself caught out by the differences.

For both self employed and limited company directors or employees, there is one thing in common, any expenses must be wholly and exclusively business related. This applies all the way through. Combined business and personal travel or subsistence expenses are not allowed. You must always deduct any non-business element.

Spaghetti

1. Self Employed

Yes

Travel for work outside the normal commute

Food and drink during the day on journeys outside the normal pattern of work

Overnight accommodation on work journeys

Dinner and breakfast when staying overnight

No

Normal commute to and from base of work

Food and drink on journeys as part of the normal pattern of work

Parking fines, speeding tickets and other penalties

Travel costs not exclusively for work

Why do I need to know my base of work?

The first thing you need to think about is your base of work, so that you can work out what is your ordinary commute. If you rent working space anywhere then it is generally straightforward as that will be your base of work. If you mainly work from home then that will usually be your base. If you don’t rent space and are generally out and about e.g. joiner, then your base might also be home. This is particularly true if you are claiming use of home as an office as part of your expenses.

What travel can I claim?

You can’t include any expenses for your journey between your home and base of work as this is considered to be part of your ordinary commute. Other travel outside the ordinary commute is generally allowed provided it is “wholly and exclusively” for work purposes. You can claim motor expenses either by mileage or full cost (more on this in a future post). You can also claim other travel expenses such as airfares, rail, taxis, bus, congestion charge, toll charges.

You can’t claim for penalties and fines, so no speeding or dodgy parking. You also can’t claim for Oyster card top-ups if you also use the card for personal travel.

What meals can I claim?

“Everyone must eat to live” says the tax office, which means that in generally you can’t include your day to day meals as a business expense. However, there is recognition that meals while out and about traveling can end up costing more. It all comes down to  – is the journey one that you make infrequently and outside your normal pattern of work?

If the travel is part of your normal pattern of work then you can’t have any meals during the day e.g. a joiner travels and works out and about at various client sites. The travel costs are allowable but the subsistence is not because it is part of the normal work pattern.

If the journey is more of a one-off and not part of the normal work pattern then you can include meal expenses during the day e.g. web designer working from home can include both travel and meals costs for a whole day out at a conference.

Staying away

If your business requires a trip with an overnight stay then you can claim for the cost of the accommodation and reasonable expenses for the evening meal and breakfast.
Beware – anything claimed for locations too close to your base of work might not be considered to be subsistence. Also bear in mind that the HMRC guidance says reasonable costs.
Beware – alcohol is not subsistence unless it is purchased with a meal and even then it must be reasonable e.g. one drink or half a bottle of wine.

2. Limited Company- Directors and employees

Yes

Travel other than commute to and from permanent workplace

Food and drink on work journeys outside normal commute –  actual or day rates

Overnight accommodation on work journeys

Dinner and breakfast when staying overnight

No

Normal commute to and from permanent workplace

Parking fines, speeding tickets and other penalties.

Travel costs not exclusively for work e.g. top up of travel card also used for non-work.

Being an employee

If you have a Limited Company then it is a different situation from being self employed as you and the company are separate. In terms of expenses you are considered an employee, even if you are a company director. As an employee you are effectively claiming your travel and subsistence expenses from the company and being reimbursed. In practise, if you are a one-person limited company you are probably not making a physical expenses claim, but you still need to abide by the same rules.

It used to be the case that for any employee (even a director being paid by the company) all reimbursed expenses, (whether wholly legitimate expenses or a benefit in kind), need to be included on a P11D for at year end and also declared on the personal tax return. They could then be offset on the personal tax return by the legitimate business expenses. This complicated process could be avoided by applying for a dispensation via the P11Dx form.

UPDATE – Since April 2016 the process has changed. Dispensations, that had to be applied for by each employer have been replaced with exemptions that apply to all employers. To qualify for an exemption you must either pay back the actual cost of the expenses or use one of HMRC’s benchmark or flat rates. If you want to pay any other rate you still need to apply to HMRC. These exemption apply to employee travel costs as well as other areas such as business entertaining, mobile costs and uniform costs.

Alternatively using the company business account to pay for hotels, trains etc means that the company is paying directly and avoids the issue of reimbursed expenses.

What is a permanent v. temporary workplace?

An employee has a permanent workplace and can actually have more than one permanent workplace. Anywhere that you work regularly e.g. at least once a week, on a long-term basis is a permanent workplace. Travel to and from your permanent workplace is classed as your ordinary commute.

If you are going somewhere to carry out a short-term task then it is a temporary workplace. If the task you are going to do lasts more than 2 years plus you are spending more than 40% of your time there, it becomes a permanent workplace and part of the ordinary commute (see HMRC).

The rules relating to temporary and permanent workplaces are actually quite complicated, so if your situation is not straightforward e.g. some contractors, then it is worth having a specific chat with your accountant.

HMRC has also produced a guide for employers that gives further details – 490 Employee Travel.

What travel can I claim?

Travel costs for the ordinary commute to and from your permanent workplace are not allowed. Other travel outside the ordinary commute is generally allowed provided it is “wholly and exclusively” for work purposes. You are allowed travel costs to a temporary workplace where it costs you more than your normal commute.

You can claim motor expenses either by mileage or full cost (to be covered in a future post). You can also claim other travel expenses such as airfares, rail, taxis, bus, congestion charge, toll charges.

You can’t claim for penalties and fines, so no speeding or dodgy parking. You also can’t claim for Oyster card top-ups if you also use the card for personal travel.

UPDATE – From April 16 there have been some changes that will limit what can be claimed in travel and subsistence for workers engaged through an umbrella company or personal services company, who fall under IR35 and are under the supervision, direction and control of the end-user.

What meals can I claim?

HMRC generally follows the “eat to live” rule, however meal expenses for employees are allowed where they are part of the necessary traveling in the course of the job. This does give a bit more leeway than for a sole trader. However, this is an extremely subjective area and certainly not black and white.

Lunch bought at motorway services or a train station for a one-off journey is more than likely OK as you are obviously traveling and having to pay extra because of it. However, the more the journey resembles your normal pattern of work, the less likely you are to be able to claim the expenses without potentially incurring a personal benefit-in-kind.

Beware – as with self employed, alcohol is not subsistence unless it is purchased with a meal and even then it must be reasonable e.g. one drink or half a bottle of wine.

Meal day rates v. actual costs

Meal expenses can be charged as they are incurred, based on the actual receipt amount.

HMRC has a benchmark scale rates for subsistence expenses that can be used instead. These benchmark rates can be useful if you are going to be working away a lot of the time as it can simplify things and does not require processing so many individual receipts.

Remember you can only use one scheme or the other. If you are going to use actual subsistence expenses then you must save receipts and if you are going to use benchmark rates then you must apply to HMRC first.

Overnight accommodation

If your business requires a trip with an overnight stay then you can claim for the cost of the accommodation and reasonable expenses for the evening meal and breakfast. Beware – anything claimed for locations too close to your base of work might not be considered to be subsistence. Also bear in mind that the HMRC guidance says reasonable costs.

The basics to remember across the board are business costs only and generally only food if you are not in your normal pattern of work or are staying overnight.

Picture by Luca Nebuloni