Are you fed up with dealing with multiple expenses and all those itty bitty receipts for meal deals, coffees and fast food?
What you can or can’t claim differs dependent on the legal entity under which you trade, and sole traders are less well off than companies and employees in terms of what can and can’t be claimed.
Whether you are a director of a single person limited company, who is tired of the paperwork, or you run a company with employees who you are constantly having to chase for supporting receipts to their monthly expense claims, replacing individual receipt claims with a flat rate subsistence allowance might be the way forward for you.
Subsistence allowance in its simplest terms simply relates to food and drink, although often we tend to group ‘travel and subsistence’ together and it can also refer to the costs of accommodation and incidental overnight expenses… if you happen to forget your toothbrush!
Self-employed sole traders and partnerships
If you trade as either a sole traders or a partnership, then you can claim tax relief for subsistence if you are incurring business expenses for travel which is classed as outside your normal pattern of travel.
This includes business travel for an overnight business trip, and travel where you are trading between two different business locations.
Limited Companies And Employees
Directors of Limited Companies and their employees can claim additional tax relief for subsistence if the expenditure is incurred with business travel or an overnight business trip.
You can claim daily fixed rate deductions according to HMRC scale rate laid out below. Please note that this is limited to 3 meal rates on one day or 24-hour period.
Breakfast rate – up to £5
This rate, known by us as the “bacon butty early start incentive” may be paid when you leave home earlier than usual, and before 6am. Unfortunately if you are a regular early bird and usually leave for work before 6am this doesn’t apply for you.
One meal (5 hour) rate – up to £5
If you are away from your usual place of work for more than a minimum 5 hour period then you can claim this lunch allowance rate of £5 – also referred to as your ‘meal deal’ rate. You can claim this allowance even if you are well organised enough to have made yourself (or have someone looking after you incredibly well!) a packed lunch to take with you.
Two meals (10 hour) rate – up to £10
If you are away for your usual place of work for more than a minimum 5 hour period then you can claim this two meal allowance rate of £10.
Late evening meal rate – up to £15
This rate applies if you have a late finish – ie you are working after 8pm.…. We refer to it as the ‘take away’s on HMRC rate’. Like the bacon butty rate, unfortunately this allowance will not apply if you regularly work after 8pm.
Overnight subsistence rate
A ‘flat’ (referred to by HMRC as ‘benchmark’) rate has not been set for overnight subsistence. It will still be necessary to agree a rate, if applicable, with your employer.
An employee can only be reimbursed for a meal once. If the cost of an evening meal or breakfast is reimbursed on an actual basis, for example because it is included in the cost of an overnight stay, the employee would not also be entitled to the benchmark rate for breakfast or late evening meal.
Different rates in relation to subsistence apply if you travel overseas for work. As these differ dependent on location please contact HMRC or your accountant for further details.
If you are an employee, speak with your employer about the details of their policy and how they plan to reimburse you. If you are not reimbursed as an employee you should make a claim on your tax return for a deduction for tax purposes.
And if you’d like to know more about what you can and can’t claim for when you are working from home, check out our video on the subject…
If you would like to see more details on subsistence allowance you can check out HMRC’s guide to Expenses and Benefits for travel and subsistence here.