Expenses and benefits: travel and subsistence
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1. Overview
As an employer paying your employees’ travel costs, you have certain tax, National Insurance and reporting obligations.
This includes costs for:
- providing travel
- reimbursing travel
- accommodation (if your employee needs to stay away overnight)
- meals and other ‘subsistence’ while travelling
Subsistence includes meals and any other necessary costs of travelling, for example parking charges, tolls, congestion charges or business phone calls.
There are different rules for reporting expenses relating to public transport.
2. What's exempt
You’ll be exempt from reporting or paying anything if the cost is for:
- a works bus service
- an employee with a disability (but only in certain circumstances)
- a taxi home after occasional and irregular late-night working
- a taxi home if a car-sharing system is temporarily unavailable
- bicycles or cycle safety equipment
- travelling to work because public transport has been disrupted by industrial action
Salary sacrifice arrangements
You do have to report the value of travel and subsistence benefits if you provide them as part of a salary sacrifice arrangement.
3. What to report and pay
You must report your employees’ travel to HM Revenue and Customs (unless it’s exempt). You may have to deduct or pay tax and National Insurance on it.
Business travel
Some business travel expenses are covered by exemptions (which have replaced dispensations). This means you will not have to include them in your end-of-year reports.
If you do not have an exemption, you must report the cost on form P11D. You do not have to deduct or pay any tax or National Insurance.
Reimbursing more than the necessary costs
If you reimburse your employee with more than the necessary costs of their business travel, the extra amount counts as earnings, so:
- add it to your employee’s other earnings
- deduct and pay PAYE tax and Class 1 National Insurance through payroll
If you’ve agreed with HMRC that this will be a scale rate payment, you will not need to report it.
Private travel
All non-business travel is counted as private. This includes the journey between an employee’s home and permanent workplace.
You arrange the transport and pay for it
You must:
- report the cost on form P11D
- pay Class 1A National Insurance on the value of the benefit
Your employee arranges it and you pay the supplier directly
You must:
- report the cost on form P11D
- add the cost of the transport to the employee’s other earnings and deduct and pay Class 1 National Insurance (but not PAYE tax) through payroll
Your employee arranges and pays for the transport, and you reimburse them
The money you pay them counts as earnings, so:
- add it to your employee’s other earnings
- deduct and pay PAYE tax and Class 1 National Insurance through payroll
Salary sacrifice arrangements
If the value of travel and subsistence is less than the amount of salary given up, report the salary amount instead.
These rules do not apply to arrangements made before 6 April 2017 - check when the rules will change.
4. Technical guidance
The following guides contain more detailed information: