Claiming Travel Expenses – What You Should Know
Mileage Claims
3 Min Read

Claiming Travel Expenses – What You Should Know

Many businesses require their employees to travel for work. Did you know that businesses can therefore save substantial amounts of money by claiming tax deductions and VAT on travel expenses? Firms often miss out on this simply because they aren’t aware of the ins and outs of how to claim.

We’ve outlined everything you should know about claiming travel expenses in this article. Learn about the most important aspects:

  1. What counts as business travel?
  2. Why is it important to keep track of business travel expenses?
  3. What business travel expenses can an employee claim?

As well as more detailed information:

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1. What counts as business travel?

HMRC considers business travel to be a journey that someone makes in order to complete their work, for example:

  • A journey to perform work, such as driving to another office for a sales meeting
  • Travelling between two workplaces belonging to a company
  • A journey from an employee’s home to a client’s office
  • Driving to a temporary workplace such, e.g. visiting a building site

There are some exceptions of other journeys that also count as business travel. Find out more about these here: What is Business Mileage?

2. Why is it important to keep track of business travel expenses?

In recent years, HMRC has paid more attention to whether businesses track their travel expenses correctly and your business could face a high fine if it fails to record expenses accurately.

To track work travel expense and avoid these hefty fines, HMRC expects you to keep detailed records of:

  • Business mileage
  • Hotel accommodation for overnight stays
  • Public transport, food and drink costs
  • Parking fees, tolls and congestion charges
  • Business phone calls and printing costs

However, HMRC also has a few exceptions where it is not necessary to keep detailed records of a journey, these are:

  • A bus service provided by an employer
  • If the employee has a disability (but only in certain circumstances)
  • A taxi ride home when car-sharing is temporarily unavailable
  • Bicycles or cycling safety equipment
  • A taxi home after occasional and irregular late-night working
  • Travelling to work when industrial action has disrupted public transport

3. What business travel expenses can an employee claim?

Employees can claim for various work travel expenses such as meals, overnight accommodation, parking fees, road tolls, and congestion charges.

Expenses are not considered to be a taxable benefit for the employee if:

  • The employer directly pays business travel expenses
  • An employee first pays any travel expenses and is then reimbursed.

On the other hand, if the employer doesn’t fully repay the employee for their business travel expenses, the employee is able to deduct the difference from their earnings and claim tax relief with HMRC at the end of the tax year.

However, you should be aware that there a few exceptions here and you may not be able to claim a tax deduction for all travel expenses. We’ll look into this in more detail below.

What if employees get a set allowance regardless of how they spend it?

Here, we’re referring to a ‘round sum allowance’. This is when the employer gives an employee a set allowance to spend as he or she chooses. As a ‘round sum allowance’ counts as earnings, employers need to include it in the employee’s earnings when:

What if the employer reimburses more than the necessary costs?

If the employer reimburses the employee more than the necessary cost of their business travel, the additional money counts as the employee’s earnings. Therefore, the employer must:

  • Include the amount in the employee’s other earnings
  • Deduct and pay PAYE tax and Class 1 National Insurance through payroll.

If you’ve agreed on a scale rate payment with HMRC then you don’t need to report this.

What if the employer reimburses private expenses?

Any private expenses paid for by an employer are considered to be earnings, as private expenses are not seen to be necessary for the employee to do their job. For example, a journey from an employee’s home to their permanent workplace counts as a private travel expense according to HMRC.

In this case, employers need to:

  • Include the amount in the employee’s other earnings
  • Deduct and pay PAYE tax and Class 1 National Insurance through payroll.

What if the business has implemented a salary sacrifice arrangement scheme?

If an employer and employee have a salary sacrifice arrangement, also commonly known as total remuneration packaging, then the employer must report how much they have paid for expenses such as travel and hotel stays.

To do this, employers must fill in a P11D form for each individual employee, unless the travel is exempt. In the case of an exemption, the employer isn’t required to deduct or pay tax or National Insurance.

Can the business claim VAT on travel expenses?

An employer can reclaim VAT on an employee’s travel expenses for business trips, including meals and accommodation that the employer pays for.

However, if the employer pays its employee a flat rate for expenses then it’s not possible to claim VAT.

There are special rules for when it is and isn’t possible to claim VAT on travel expenses, especially when it comes to business mileage. We’ve explored them in detail here: Claiming VAT on Business Mileage.

Does HMRC have set expense rates that businesses can follow?

Yes, HMRC has set rates which employers can use to determine what’s tax-free and the amount that they should reimburse their employees:

  • HMRC Mileage Rates – to claim mileage expenses tax-free, HMRC has set mileage rates according to whether employees drive company-owned vehicles or their own private cars.
  • Overnight and meal allowance – HMRC has also set rates that you can use to claim overnight and meal expenses tax-free.

How can I learn more about mileage claims?

There are a lot of HMRC rules to understand when it comes to recording business mileage and managing mileage claims. Reading through all the information on different websites can get confusing, which is why we have put together a complete guide to mileage claims, where our experts at Autotrip go through everything that you ought to know.

Quick Tip – How to implement a transparent travel expense policy:

Here at Autotrip, we’ve developed a mileage tracking solution that lets businesses view when and where employees drive for work during regular business hours.

Drivers can record all their travel expenses for business trips with our software while keeping their personal trips private.

gps-mileage-tracker

Receipts and any relevant documents can also be attached to their mileage claims, making it easy to organise all work travel expenses in one centralised place.

Find out how we make mileage simple at autotrip.com and see how we’ve recorded 7.8M miles and 482,000 business trips in the past year, saving our clients 1000s of hours that would have been otherwise spent logging mileage manually.

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