Getting to grips with HMRC subsistence rates is key for any UK business, but it can feel like a lot to take on.
What expenses can you claim for? How do these rules impact your budget? This guide aims to simplify things.
With clear, easy-to-follow advice, we’re here to help you navigate these rules with confidence, making sure your business stays on track and in line with HMRC regulations.
Please note: The content provided in this blog is for informational purposes only. For more detailed advice consider consulting a tax professional.
What are HMRC Subsistence Rates?
The HMRC offers a handy set of guidelines for businesses that allow them to reimburse employees for certain work-related expenses. This is what we call subsistence rates.
Essentially, HMRC subsistence rates are pre-set amounts that businesses can pay employees for travel costs without jumping through hoops every time for approval.
What Qualifies for Meal Expense Claims?
Here's a quick checklist:
The expenses for meals or beverages must be paid for after the commencement of the work-related trip.
The trip must be outside of their regular commute and must be undertaken for official business purposes.
The travel must require the employee to be away from their usual workplace for a minimum of 5 hours.
Note: Starting from April 2019, HMRC has eliminated the need for businesses to present receipts for all expenses related to a business trip. This change means less paperwork for everyone involved - from business owners to finance teams to the employees filing claims.
Is Meal Allowance Taxable in the UK?
Good news - since 1998, they're not. This means when your employees travel for work and eat out, these meal costs won’t be taxed.
For businesses, this is a win-win. If your meal expenses tick all the boxes we talked about before, you can subtract these costs from your total taxable income. Essentially, you're left with a lower taxable amount, which could mean paying less to HMRC.
However, there are a few scenarios where meal allowances can't be deducted:
If no actual meal or drink is bought.
If the meal expense isn’t extra to what you'd normally spend.
If you're using the "staying with friends or relatives" allowance.
If meals are eaten at home.
If meals are included as part of a training course, conference, or similar.
If your meal is included in the cost of your train or plane ticket.
How HMRC Subsistence Rates Affect Your Business Budget
Changes to HMRC subsistence rates play a big role in shaping your company’s budget, especially if your team often travels for work.
Here’s what you need to know:
If these rates go up, you'll find that the costs for meals and small expenses during trips increase, which could bump up your overall travel and expense budget.
A decrease in rates, on the other hand, might give you a bit more wiggle room in how you allocate your budget.
It's super important to stay on top of these rate changes to make sure your business stays on budget and follows HMRC rules.
So, what can your business do to adapt?
Tips for Adapting to Changes in HMRC Subsistence Rates
Here are some tips to help your business smoothly adapt to changes in HMRC subsistence rates:
Perform regular policy reviews. Keeping an eye on your travel and expense policies can help you spot where you might need to make some tweaks. Maybe it’s time to set some spending limits, tighten up approval processes, or encourage choosing less pricey options for meals and incidentals.
Use technology to your advantage. Leverage an expense management system to track and manage employee travel expenses efficiently. These tools can automatically update changes in subsistence rates, ensuring financial compliance and simplifying the reimbursement process.
Educate your team. Keep your employees informed about the importance of adhering to the updated subsistence rates and company policies. Regular training sessions can help ensure everyone is on the same page and can help reduce overspending.
Negotiate with vendors. For businesses with significant travel needs, negotiating rates with hotels and meal providers can lead to cost savings that help offset changes in subsistence rates.
Plan for contingencies. Always have a contingency budget for unexpected changes in subsistence rates or travel needs. This ensures your business can adapt without compromising on financial stability.
HMRC Meal Allowance Rates for 2023/2024
The HMRC meal allowance rates are as follows:
For travels lasting 5 hours or more: The maximum claimable meal allowance is £5.
For durations of 10 hours or more: A £10 meal allowance is applicable.
If away for 12 hours or more: You are entitled to a £15 meal allowance.
For a full 24-hour period or longer: The meal allowance reaches a maximum of £25.
The HMRC calculates these durations from the moment one departs from their home or primary workplace until their return.
Note: These HMRC travel and subsistence rates apply only to travel within the United Kingdom. For a comprehensive list of recommended allowance rates by country, visit the HMRC website.
International Meal & Room Allowance Rates for UK Businesses
For UK-based businesses with employees who travel internationally, HMRC offers a detailed list of suggested meal and accommodation allowances by country.
Below, we’ve summarised the rates for some top business travel destinations to help with your planning:
United States (USD):
Meal allowances range from $21 to $34.50 for a duration of 5+ hours, and room rates vary, with cities like Boston and New York City on the higher end at around $239 and $216 respectively.
Canada (CAD):
Canadian cities like Ottawa and Toronto offer meal allowances from $38.50 to $47 for 5+ hours, with room rates up to $224 in Vancouver.
Europe (EUR):
In European cities, meal allowances for 5+ hours stretch from €22 in Berlin to €40 in Paris. Room rates in Paris are around €199.50, showcasing the variety across different cities.
Asia:
In China, cities like Bangalore and Beijing provide meal allowances from ₹1685.50 (INR) and ¥232 (CNY) for 5+ hours, respectively. Room rates can go as high as ¥1344.50 in Beijing and ₹16809.50 in Bangalore.
In Singapore, a 5+ hour meal allowance is SGD 91.50 with room rates at SGD 318.
Hong Kong stands out with meal allowances of HKD 292.50 for 5+ hours and room rates reaching HKD 2376.50.
HMRC's guide includes how to utilise these rates for reimbursing employees for international business travel and reporting these expenses.
This concise overview is to give businesses a quick reference to budget for travel expenses in various global cities.
How to Report Subsistence Allowance to HMRC
When it comes to reporting your business's subsistence allowance spending to HMRC, the process folds into your usual end-of-year financial reporting.
Specifically, you'll need to fill out a P11D form for each employee who has received expenses or allowances, such as per diem or meal allowances, over the tax year. In some cases, you might also need to complete an additional P11D(b) form.
Your team must submit their expense reports regularly, ideally after each business trip, to account for any subsistence expenses.
Due to the broad nature of what can count as subsistence expenses, it's important to vigilantly review these claims. This helps in preventing false or exaggerated claims and ensures the integrity of your expense reporting against any potential fraud.
Visit HMRC’s website for a detailed guide on how to report expenses and benefits.
Best Practices for Managing Travel Expenses
Keeping travel costs under control is key to a healthy business budget. Here’s how finance teams can keep everything on track:
Create a clear travel policy: Draft a travel and expense policy that spells out what’s covered, spending limits, and how to get expenses approved. Make it as clear as possible.
Educate your employees: Make sure everyone knows the policy inside out. Offer guidance on how to spend wisely while travelling for work.
Opt for cost-effective options: Encourage the team to save money where they can, like booking hotels early or choosing budget-friendly meal options.
Leverage technology: Tap into technology with expense management software. It makes tracking employee spending and getting reimbursed much simpler.
Regularly review and update your policy: Regularly check and tweak your travel policy to make sure it’s up to date with the latest rules from HMRC and matches up with what’s happening in the travel world.
With these strategies, businesses can better manage their travel expenses, ensuring they stay economical and in line with HMRC standards.
Streamlining Travel Expense Management with ExpenseIn
For businesses looking to get a handle on travel and expense management, ExpenseIn is a game-changer.
This platform is all about making expense reporting straightforward and stress-free, combining all the tools you need into one easy-to-use system.
What Makes ExpenseIn Stand Out?
Effortless expense tracking: No more wrestling with spreadsheets. ExpenseIn brings everything into one place, making it easier to create, approve, and report on expenses.
On-the-go claims submission: With its mobile app, submitting expenses is as easy as snapping a picture, whether it’s for a taxi ride or a business lunch. Plus, it automatically works out mileage and even how much carbon you’re using.
Real-time reporting: Get a clear view of your spending with real-time reports. This means you can see where money is going and make smarter budget decisions.
Automated workflows: ExpenseIn automates the boring stuff - like checking receipts and reminding you of policy rules - so you can focus on more important tasks.
Integration capabilities: It easily syncs with the other tools and systems you’re already using, smoothing out your workflow.
By bringing ExpenseIn into your business, you’re not just streamlining how expenses are handled; you’re also making life easier for everyone involved. It’s about spending less time on paperwork and more time on what matters, supported by a team that’s got your back every step of the way.
Secure, compliant, and ready to integrate - it’s how travel expense management should be.
Book a free demo of ExpenseIn today to see how ExpenseIn can help streamline your travel and subsistence expense processes.
