How much Subsistence can I pay without it being taxed ?

From 6 April 2009, Revenue and Customs have introduced an advisory system of benchmark scale rates which all employers can use to make subsistence payments free of tax and NIC to employees. This affects subsistence expenses incurred while travelling on an allowable business journey during the day only, when the following qualifying conditions are met:

- the travel is in the performance of an employee’s duties or to a temporary place of work;

- the employee is absent from his normal place of work or home for a continuous period in excess of either 5 or 10 hours; and

- the employee incurs a cost of a meal (i.e. food and drink) after starting the journey.

Employers wishing to use the benchmark system must notify Revenue and Customs by ticking the appropriate statement on form P11DX (¶4740) before starting to use the system.

The following rates apply:

Breakfast (irregular early starters only) The employee leaves home earlier than usual (before 6 am) and pays for breakfast – £5

One meal rate The employee has been away from his home/normal place of work for a period of at least 5 hours and pays for a meal – £5

Two meal rate The employee has been away from his home/normal place of work for a period of at least 10 hours and pays for meals – £10

Late evening meal rate (irregular late finishers only) The employee has to work later than usual (finishing after 8 pm) having worked his normal day, and has to buy a meal which he would usually have at home – £15
Note:

1. A limit of three meal rates in a 24 hour period applies.

2. Where employees are required to start early or finish late on a regular basis, the 5 or 10 hour rates could be paid provided all the other qualifying rules are satisfied.

3. If the employee is paid an allowance under the 5 or 10 hour rule, the late meal allowance could still be paid if work finishes after 8 pm and he buys a meal that he would usually have at home, unless he regularly finishes work late.

An employer may choose to pay higher rates, although any excess will be liable to tax and NIC unless a specific agreement is reached with Revenue and Customs, or the employer is merely reimbursing the actual cost incurred.

Incidental overnight expenses

The expenses which fall under this provision are those considered incidental to the individual’s stay away from his usual abode during a qualifying absence from home. For example, this might include telephone calls home, laundry or newspapers.

A qualifying absence from home is any continuous period during which the individual is obliged to stay away from home for at least one night.

Personal incidental expenses are not earnings providing they are below the de minimis limit of £5 per night in the UK and £10 per night outside the UK. Where the de minimis limit is exceeded, the whole amount (not just the excess) will become taxable.

Where the employee spends more than one consecutive night away, the total expense for the period is compared to the total of the de minimis amounts for the nights spent away. There is no requirement for each night to be looked at in isolation. Where the employer pays the expenses directly and the expenses for a number of employees are aggregated so that separate identification would be difficult, Revenue and Customs will accept a reasonable apportionment of the expenses.

Where the expenses of travelling to a particular place would not be deductible, this prohibits any claim for related accommodation expenses. For example, where a salesman makes a visit to relatives on the way to a client, the cost of travel from the office to the relatives’ house will not be deductible, and neither will the cost of hotel accommodation nearby.