Whether you are in business as self-employed or via a limited company, there is almost certainly likely to be occasion to claim travel and/or subsistence as a business expense. As with all business expenses, any travel and subsistence must be incurred wholly and exclusively for the purpose of the trade. The rules applicable to the self-employed and those running a company, do vary slightly and are explained further on in this article.
Business travel might include travelling to see a client, purchase goods or attend a training course, as examples. It is however important to realise that if you have a separate, permanent work-base away from your home, the commute between your home and this workplace is not an allowable travel expense. The exception to this rule would be if the work location is a temporary place of work. This would be the case if you were working at the location for a limited duration (and which is not expected to exceed 24 months).
Subsistence includes accommodation, food and drink (except alcohol) costs whilst away from the permanent workplace. The cost of the expense incurred is an allowable business expense.
For the self-employed, your travel expenses will not only include the fuel, but also other costs of running a vehicle, such as servicing, road tax, MOT, parking. All these expenses can be included in your accounts and where there is both business and private use included in the expenditure claimed, an adjustment can be made on your self-assessment tax return to disallow the private-use element. If you use public transport, the ticket cost would be an allowable business expense.
For company-owned vehicles, the cost of fuel, servicing, road tax, insurance etc, are all allowable business expenses, as are public transport and subsistence expenditure (as with the self-employed). There may however be the situation whereby, a director or employee use their own car for business travel. In this situation, the business can be charged a mileage rate by the individual and it is the mileage claim that is the expense in the company accounts. This mileage is meant to cover the full cost of running a vehicle and therefore ensures that director/employee is fairly reimbursed. Given the rising cost of fuel, it’s debateable if these rates are now realistic!
The HMRC published rates are 45p per mile for the first 10,000 business miles in the tax year, reducing to 25p per mile for those miles claimed in excess of 10,000 miles. If a company chooses to reimburse at a higher rate, the excess over the HMRC approved rates, is a taxable benefit-in-kind, if the company reimburses at a lower rate the employee/director can submit a claim to HMRC for the difference. It’s also worth knowing (for the cyclist or environmentally friendly) that if you use a bicycle, a mileage rate of 20p per mile can be claimed. Ensure a mileage log or expense claim is maintained, so that you have record of the expense claimed.
When it comes to claiming subsistence, for practical reasons a company may choose to pay scale rates to a director/employee. Rather than process numerous receipts, the company can instead choose a scale rate (either an agreed rate with HMRC or using the HMRC benchmark rates), provided the individual has incurred a cost after their business journey has started. The current subsistence rates are:
|Away for over 5hrs||£5|
|Away for over 10hrs||£10|
|Away for over 15hrs||£25|
There are also rates published for overseas travel, which not only include a subsistence scale rate based on hours away from the normal place of work, but also room rates and meal rates if applicable. Further information on these can be gained from the HMRC Employment Income Manual.
Summary of Travel and subsistence claims
Many businesses will certainly have travel and subsistence expenditure to claim and although at first glance it may seem a simple matter, it is worth considering if you are claiming all that is possible and you are keeping the appropriate records. Be aware that there are pitfalls and ensure you don’t fall into them
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For more information on allowable business expenses click here