Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What do HMRC include as travel expenses?
If you pick up the tab for any of your employees’ travel costs, you might have to report these expenses to HMRC and as a result could end up paying additional National Insurance and tax.
HMRC considers travel costs to include:
- Providing travel
- Reimbursing your staff for travel costs
- Accommodation costs if your employee has to stay overnight
- Meals and other subsistence costs picked up while travelling
When HMRC refer to subsistence, they mean all those costs which are a necessary part of travelling such as phone calls, parking costs, congestion charges or road tolls.
If the expenses relate to the use of public transport then they are treated in a different way – see our guide ‘Public transport’ for information on those reporting rules.
Are there any exemptions?
If the cost relates to any of the following then it is considered to be exempt and doesn’t need to be reported to HMRC or paid on:
- Occasional taxis home after working late (as long as these instances are occasional and irregular)
- A taxi home if it is intended to replace a car-share system which is temporarily unavailable for any reason
- Bicycles and any associated safety equipment
- Travel costs to work incurred as a result of industrial action affecting public transport
- A works bus service
- Travel costs for an employee with a disability (only in certain circumstances though – the exemption doesn’t cover all of these travel costs).
If the travel costs form part of a salary sacrifice arrangement, it needs to be reported to HMRC whether or not it is covered by the above exemptions.
How to you report these expenses to HMRC and pay on them?
If the travel costs aren’t covered by an exemption, you need to report it to HMRC and as a result, there may be additional National Insurance or tax to be paid on it. What you need to pay and how you report it depends on the nature of the travel and how it is arranged and paid for.
If the business travel costs are covered by an exemption, you won’t need to report these costs to HMRC nor will you need to include them in your end-of-year reporting. If they aren’t covered by an exemption, you will need to report them on your P11D form but there will be no additional tax or National Insurance to deduct. However, if you reimburse more than the necessary costs of the business travel, HMRC will consider this to be additional earnings so it will need to be added to the employee’s other earnings and deduct and pay PAYE tax and Class 1 National Insurance as you would for their other earnings. If you have agreed a scale rate payment with HMRC relating to these costs, they won’t need to be reported to HMRC.
Any travel that is not for business purposes will be considered to be private travel by HMRC. This includes the employee’s commute between their home and a permanent place of work. How it is reported to HMRC and paid on depends on how it was arranged and paid for.
- If you arrange and pay for the travel on behalf of your employee, you need to report this cost on your P11D form and pay Class 1A National Insurance on the value of the benefit.
- If your employee arranges the travel but you pay the supplier directly, it needs to be reported on your P11D form. You then add the cost of the transport on to your employee’s other earnings and deduct and pay Class 1 National Insurance on it but you won’t deduct any PAYE tax on the expenses.
- If your employee arranges and pays for the travel and you reimburse them, HMRC considers these expenses to be earnings so they should be treated as such. They need to be added to your employee’s other earnings and then Class 1 National Insurance and PAYE tax should be deducted on these additional earnings through payroll.
Salary Sacrifice Arrangements
If the value of the transport and any associated subsistence form part of a salary sacrifice arrangement, and the amount of salary given up is more than the value of the expenses, you need to report the salary amount to HMRC instead. This only applies to salary sacrifice arrangements made after 6th April 2017.
How can DSR Tax Claims help?
We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful. Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.