If you are an employer and have appointed an employee there are various expenses to be taken care of. Here, we will talk about travel expenses. As an employer it is your duty to pay your employee travel costs, there are certain tax, National Insurance and reporting obligations.
What is a travel expense?
Travelling expense is the cost associated with traveling for the purpose of conducting business related activities. This expense can be reimbursed to an employee by an employer as it is used for business purposes. This also involves using your own car.
As an employee, you are entitled to claim tax free reimbursement for costs of travelling that you are obliged to incur, to do your job. If your employer does not reimburse your travel expenses, you may be able to claim a deduction from your income and obtain a tax refund, provided you are paying the tax.
You cannot ask for a reimbursement tax free from your employer of the expense of normal commuting that is travel between your home and office. If your employer does reimburse you for the cost of normal commuting, you usually have to pay tax and NIC on this.
The travel costs cover the following:
- Providing travel
- Reimbursing travel
- Accommodation (if the employee stay overnight)
- Meals and other subsistence while traveling
Subsistence may include meals and other necessary cost of traveling for example parking charges, business calls, or tolls.
The rules apply where an employee:
- Personally provides services to another person
- Is employed through an employment intermediary
- Is under the supervision; direction of control of any person in the manner in which they undertake their work.
Supervision, Direction and Control Test is critical in determining whether a worker provides services through an intermediary is able to claim a deduction on the cost of travel between home and work. A worker who provides personal services through intermediary is still able to claim a deduction for home and work travel if they are not subject to supervision, direction and control.
Using your own car
Trips such as travel from office to visit your customers using your own car.
When using your own car, you should keep a log of business travel to include dates, destination, purpose of your trip and how many business miles you travelled – this may involve setting your own mileage counter for each travelled journey and keeping a record of the same.
For all the travel costs associated with business paid by you, maintain the receipts of the trips. These are the proof of payments made by you in cash or credit card.
If you do not get a receipt, make a note of who you paid, what you spent with the date.
What are the approved mileage allowance payments (AMAP) rates?
The approved mileage allowance payment rates are:
|First 10,000 business miles in the year||Each business mile over 10,000 miles in the year|
|Cars and vans||45p||25p|
If you have more than one job and your employers are not related to each other, then you can have a 10,000-mile limit for each job you hold. If you have more than one job and your employers are related to each other, then you have only one 10,000-mile limit to be divided between all the affected jobs.
When you take someone with you when on business
If your employer pays you for taking a passenger up to 5p per mile may be paid to you tax free, anything over an allowance of 5p per mile is taxable and NIC is applied. The passenger travelling along must also be an employee and the journey must be for business only.
Unlike AMAP, You cannot claim any tax relief, if your employer pays you less than 5p per mile to carry a passenger.
You can claim tax relief if:
- you use your own money for things that you must buy for your business job
- you only use these things for your work
You cannot claim tax relief if:
- Your employer gives you all the money back for all the expenses incurred
- Your employer provides an alternative, for example your employer gives you a laptop for work but you want a different type or model
You must have paid tax in the year. You will get tax relief based on what you have spent and the rate at which you pay tax.
If you spent £80 and pay tax at a rate of 20% in that year, the tax relief you can claim is £16. For some claims, you must keep records of what you’ve spent. You must claim within 4 years at the end of the tax year. If your claim is for the current tax year, HMRC will usually make any adjustments needed through your tax code.
HMRC will either make adjustments through your tax code or give you a tax refund, if your claim is for the previous tax years.
Note: If you do not complete a tax return, you can usually use form P87 to claim tax relief for expenses.