Employee Expenses

Employee Expenses: Exemption Regime and Reporting Rules

Under the current employee expenses regime, there are exemptions available that relieve businesses from the requirement to report certain reimbursed expenses on form P11D, provided specific conditions are met. AHACCOUNTANTS offers guidance on the application of this exemption to businesses in Nottingham, ensuring compliance with tax regulations.

Exemption Regime Overview

The exemption applies to reimbursed expenses that are eligible for full tax relief. When the conditions are met, businesses do not have to pay tax, NIC, or report the expenses on a P11D. However, it is crucial for employers to ensure the expenses are fully deductible for tax purposes.

Applicable Expense Types:

• Travel and subsistence expenses.
• Fees and subscriptions.
• Business entertainment expenses.

Other non-allowable expenses must still be reported on a P11D and may be subject to PAYE and NIC. Unreimbursed business expenses may qualify for employee tax relief.

Conditions of the Exemption Regime

Employers must determine if the reimbursed expenses would qualify for full tax relief for the employee. To ensure compliance:

• Establish a clear corporate policy on reimbursable expenses.
• Require employees to submit expense claims with receipts.
• Ensure senior personnel review and authorize claims.
• Conduct regular checks on claims to verify their validity.

Scale Rates for Travel and Subsistence

There are two key types of scale rates that employers can use for reimbursing employees’ travel and subsistence expenses:

1. Benchmark Rates: Set reimbursement rates for meals, applicable only if the employee incurs expenditure during qualifying business travel.
   • 5 hours of travel: £5 allowance.
   • 10 hours of travel: £10 allowance.
   • 15 hours of travel (ongoing at 8pm): £25 allowance.
   • Additional £10 allowance if the travel extends past 8pm.
2. Bespoke Rates: These rates are negotiated and agreed upon with HMRC, allowing businesses to pay customized rates.

Checking System for Reimbursements

Employers are not required to collect receipts when using benchmark rates for subsistence payments, though they must verify that the employee is undertaking qualifying travel. HMRC has provided guidance on the expected checking systems, and AHACCOUNTANTS can assist with implementing these checks or applying for bespoke rates.

Business Mileage Rates

For many employees, travel expenses primarily involve using their personal vehicles for business travel. Employers often use the statutory mileage rates known as authorised mileage allowance payments (AMAPs):

• Cars and vans: 45p per mile for the first 10,000 miles, then 25p per mile thereafter.

AMAPs are separate from the exemption regime. Fuel advisory rates are available for reimbursing fuel costs for employer-provided vehicles and are updated quarterly.

Qualifying Travel Expenses

To qualify as exempt, travel and subsistence expenses must be related to a business journey, which includes:

• Travel between different places of work.
• Travel from home to a temporary workplace.

However, travel from home to a permanent workplace (ordinary commuting) does not qualify. Additionally, some journeys to a temporary workplace may not qualify if they closely resemble the employee’s regular commute.

For assistance in navigating employee expense reporting and ensuring compliance with HMRC guidelines, AHACCOUNTANTS in Nottingham is ready to provide expert advice and support.