Expenses and benefits: travel and subsistence

Overview

1. Overview

As an employer paying your employees’ travel costs, you have certain tax, National Insurance and reporting obligations.

This includes costs for:

  • providing travel
  • reimbursing travel
  • accommodation (if your employee needs to stay away overnight)
  • meals and other ‘subsistence’ while travelling

Subsistence includes meals and any other necessary costs of travelling, eg parking charges, tolls, congestion charges or business phone calls.

There are different rules for reporting expenses relating to public transport.

Overview

2. What’s exempt

You’ll be exempt from reporting or paying anything if the cost is for:

Overview

3. What to report and pay

You must report your employees’ travel to HM Revenue and Customs (unless it’s exempt). You may have to deduct or pay tax and National Insurance on it.

Business travel

Some business travel expenses are covered by exemptions (which have replaced dispensations). This means you won’t have to include them in your end-of-year reports.

If you don’t have an exemption, you must report the cost on form P11D. You don’t have to deduct or pay any tax or National Insurance.

Reimbursing more than the necessary costs

If you reimburse your employee with more than the necessary costs of their business travel, the extra amount counts as earnings, so:

  • add it to your employee’s other earnings
  • deduct and pay PAYE tax and Class 1 National Insurance through payroll

If you’ve agreed with HMRC that this will be a scale rate payment, you won’t need to report it.

Private travel

All non-business travel is counted as private. This includes the journey between an employee’s home and permanent workplace.

You arrange the transport and pay for it

You must:

Your employee arranges it and you pay the supplier directly

You must:

  • report the cost on form P11D
  • add the cost of the transport to the employee’s other earnings and deduct and pay Class 1 National Insurance (but not PAYE tax) through payroll

Your employee arranges and pays for the transport, and you reimburse them

The money you pay them counts as earnings, so:

  • add it to your employee’s other earnings
  • deduct and pay PAYE tax and Class 1 National Insurance through payroll

Overview

4. Technical guidance

The following guides contain more detailed information:

Last updated: 8 July 2016

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