HM Revenue & Customs (HMRC) has introduced an advisory system of benchmark scale rates which employers can use to make subsistence payments to employees who incur allowable business travel expenses free of tax and National Insurance contributions (NICs). The new advisory system was implemented from 6 April 2009.
The brief sets out the framework for the system.
HMRC currently expects employers to conduct a sampling exercise before it will agree to a particular rate being included within a dispensation. The aim of the exercise is to identify a reasonable level of allowable expenditure that reflects the most common level of spending.
HMRC recognises that a sampling exercise can be burdensome and expensive for employers. It has therefore introduced an advisory system of benchmark scale rates for day subsistence payments that an employer can use without having to carry out a sampling exercise.
If the employee is paid an allowance under the five or ten hour rule, the late meal allowance could still be paid if he finishes work after 8.00 pm and buys a meal that he would usually have at home. However, if the employee regularly finishes work late because, for example, he normally works the afternoon or evening shift, he would not be entitled to use the late evening meal rate.
Early starter and late finisher ratesThe early starter and late finisher rates are for use in exceptional circumstances only and not intended for employees with regular early or late work patterns.
Guidance on how the employment income travel expense rules work can be found in HMRC’s Booklet 490. This booklet will be updated shortly to reflect the new scale rates system available to employers from April 2009.
Additionally, no tax and NICs free payment should be made if an employee does not incur an expense on meals after leaving home or his normal place of work, even if the journey was a qualifying business journey. This means that employees who do not buy a meal or who take a packed lunch from home are not entitled to a tax and NICs free payment.
Why not have higher benchmark rates for London or other locations where prices are more expensive?The benchmark rates are linked to what employers typically reimburse their employees and it would not be possible to break this down between different locations. Personal expenditure on subsistence varies significantly between employees even when working at the same location.