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Overnight allowances can be taxing

Mar 15, 2013
Accountant Mike Holmes offers some guidance on overnight allowances and expenses.
Staying away from home during the course of our work is something most of us have to do from time to time and it’s reasonable to assume that the expenses we incur will be tax deductable.  However, things are not always that simple so it’s worth doing a little homework before splashing out on an expensive hotel or going through the card in a gourmet restaurant. The Mover asked Mike Holmes from Milton Keynes accountancy firm Holmes & Company to offer some guidance.

Overnight allowances can be a sticky issue when it comes to dealing with HMRC. There are plenty of different scenarios in which they are or are not allowable, and as such, it is advisable to consult your accountant or business advisor before making any bold claim.

Here is a brief overview of some of the usual situations and allowances normally available when dealing with overnight expenses.

Tax Treatment of Drivers/Removals Crews
As a general guide, drivers and removals crews can be paid a subsistence allowance by an employer when on a long journey, however, this is classed as additional income and may or may not be tax deductible. It is tax deductible if two specific criteria are met:

  1. There MUST be documentary evidence available to show that the employee has spent the night away from home and primary workplace, as a necessary result of a business journey, and, that there were expenses incurred during this time;
  2. The amounts paid must not exceed the limits that HMRC have put in place. These also have to be reasonable reimbursements of expenses incurred. For example, paying £30 for a McDonald’s and a Pint whilst staying at a friend’s home would not be deemed acceptable.

So what are the HMRC limits?
According to HMRC, where both the above conditions are met, the limits for the past 5 years are as such …

Year Ended 31 December, 2008 - £29.85 per night
Year Ended 31 December, 2009 - £30.75 per night
Year Ended 31 December, 2010 - £30.75 per night
Year Ended 31 December, 2011 - £32.20 per night
Year Ended 31 December, 2012 - £33.85 per night
Year Ended 31 December, 2013 – still to be published

However, exceptional circumstances or special situations could make larger claims acceptable.

What is a necessary journey and when is a tax deduction due?
Travel for necessary journeys is a journey that employees make to or from a place that they must attend to fulfil their duties at work. This does not include commuting to and from your ordinary place of work.

A deduction is only due, however, when it is reasonably necessary for the employee to attend the particular place at that very occasion to fulfil their duties at work.

What evidence do I need?
The documentary evidence needed may include but is not limited to:
  • Drivers’ log sheets;
  • Drivers’ expense claims;
  • Receipts obtained on payment of lodging (i.e. hotel receipts);
  • Parking receipts;
  • Itinerary records kept by the employer.

Incidental Expenses
Incidental expenses are normally allowable for tax purposes despite not being business expenditure (for example purchase of a newspaper whilst away) whilst on business travel. However there are also limits to these expenditures.

  • £5 per night inside the UK;
  • £10 per night outside the UK.

WEALTH WARNING: Claims over these amounts can void the whole expenditure, which then becomes taxable as additional income.

Attendance at conferences, seminars and study tours
There are very strict rules regarding allowances for attendance to conferences, seminars, study tours and other business events.

Deduction is only permitted when attendance to the event is necessary expenditure and is a direct duty of the employment.

Only an employee is allowed the deductible expense, so if you were to take a family member or friend (should your employer allow it), this is not tax deductible.

The expenses must be necessary and reasonable. The expenses allowable may include but are not limited to:

  • The event fees;
  • Travel;
  • Meals;
  • Other associated costs.

For more senior employees, claims of appropriate travel and hotel expenses commensurate with normal living standards of the employee, or director, may be accepted by HMRC.

If in any doubt, consult your accountant first, as many of these allowances are subject to change.

Mike Holmes
Mike Holmes is a fellow of the Chartered Association of Certified Accountants, with over 30 years' experience in practice on his own account.

Holmes & Company is a small but enthusiastic accountancy practice based at The Mansion Bletchley Park, Buckinghamshire, the location of the now famous WWII code breaking centre and home of the world's first electronic computer Colossus.  

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