Are benchmark subsistence rates worth it?

As an employer, you don’t want to waste time carrying out extra admin tasks, such as processing multiple expenses claims for employees’ subsistence claims. Could benchmark rates provide you with a good alternative? Helen Johnstone from our Galashiels office takes a closer look.

As an alternative to reimbursing your employees’ subsistence costs (which might consist of a long list of snacks and refreshments along with parking charges and so on). You could instead choose to pay employees with tax and NI-free amounts at HMRC’s benchmark rates of up to £25 per day. This avoids the need to obtain receipts for tiny amounts of expenditure and can even be viewed as a tax-free perk for employees.

You don’t have to use benchmark rates for every employee or for each business trip and the payments don’t have to be declared on Form P11D. However, benchmark payments cannot be used with a salary sacrifice arrangement, i.e. paying employees the tax and NI-free benchmark payments in lieu of salary.

Conditions
Benchmark rates can be paid in respect of an allowable business journey during the day only, when the following qualifying conditions are met:

• That the travel is in the performance of an employee’s duties or to a temporary place of work.
• That the employee is absent from the normal place of work or home for a continuous period of at least five hours.
• That the employee incurs the cost of a meal (meaning food and drink) after starting the journey.

There is no minimum spend for the meal and the employer does not have to verify how the whole subsistence payment is spent. However, the benchmark rates don’t cover meals consumed at home, ingredients purchased to make a meal, or meals provided on a training course or at a conference.

Benchmark rates
The benchmark rates are:

• £5 where the business trip lasts at least five hours in a day
• £10 if it lasts at least ten hours
• £25 if it lasts at least 15 hours and ends after 8pm
• £10 supplementary rate where either the £5 or £10 rate is paid and the trip ends later than 8pm

Rather than having to check all the details, you are only required to ensure that qualifying travel is undertaken and be certain that no one could have reasonably suspected otherwise, obviously there is an implicit level of trust involved. Typical supporting evidence that a meal expense has been incurred might include a diary of establishments visited or a credit card statement.

However, it is important to recognise that these rates have not been increased since their introduction years ago. The reality being that they don’t cover very much given recent inflationary pressures and costs. Employees can make a specific claim to HMRC for any shortfall where they keep receipts. Although they will be better off if you make full reimbursement, which of course is deductible against profits.

IN SUMMARY
There is no need to ask HMRC for permission before paying benchmark rates. However, as benchmark rates are not exactly generous, it might be fairer to simply reimburse your employees’ actual costs where the rates are shown as being inadequate, as long as the necessary evidence is retained.

Please do contact the JRW Hogg & Thorburn team with any further queries you may have.