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HMRC has published new guidance on the overnight subsistence allowance for lorry drivers. As an employer, you can either reimburse your drivers for their actual travel costs incurred when staying away from home or pay a set rate.
The Lorry drivers’ overnight subsistence allowance
You must apply to HMRC for an approval notice to use the agreed industry scale rate for overnight stays away from home. You can do this using the bespoke scale rate application form on the HMRC website. An approval notice will be valid for five years.
The maximum amount that can be paid free of Income Tax and NICs under this allowance is £34.90, or £26.20 where the driver uses a sleeper cab. This agreed rate only applies in the UK.
There must be a checking system in place to ensure that periodic checks are carried out on a sample of employees to ensure they have actually incurred expenses for meals and other subsistence costs while travelling. HMRC will accept receipts or a time stamped photo of the meal as evidence that the employee has incurred an allowable expense. Drivers are not required to have receipts for the full £34.90 or £26.20.
There is no time limit on how long you must keep evidence of an employee’s expenditure but you should keep receipts at least until the checks for that period have been finalised.
If you do not want to pay drivers the agreed industry scale rate, there are five other options available for the reimbursement of drivers’ expenses:
1. Benchmark scale rate payments
Where an employee incurs an allowable expense on a business journey in the UK, the employer can pay up to the maximum benchmark scale rates for day subsistence and does not need to have an approval notice with HMRC in place. The benchmark scale rates are as follows:
Minimum journey time Maximum amount of meal allowance:
- 5 hours £5
- 10 hours £10
- 15 hours (and ongoing at 8pm) £25
Where an employee’s journey time is less than 15 hours but the qualifying journey time lasts beyond 8pm, a supplementary rate of £10 can be paid to cover the additional expenses incurred as a result of working late.
There must be a checking system in place to ensure employees are actually incurring expenses while travelling.
2. Bespoke agreements
If an employer wants to pay more than the overnight allowance, they will need to apply for an individual bespoke scale rate. The employer will have to establish a reasonable estimate of the expenses actually incurred by its employees after starting their journey. Again, the employer must have a checking system in place to ensure that the payments remain a reasonable estimate of the costs actually incurred and are not excessive.
3. Other allowances
An employer can pay up to £5 per night for overnight stays in the UK and up to £10 for overnight stays abroad in addition to the arrangements detailed above. This can be paid where employees incur additional incidental costs on journeys when staying away from home.
4. Overseas scale rates
The rates that an employer can pay to an employee who stays away from home overnight outside the UK differ depending on the country. An employer does not need to apply for an approval notice or check an employee’s actual spending in order to reimburse the overseas scale rates but they must be travelling outside the UK for work.
5. Direct expenses claims
An employer may instead decide to reimburse actual expenditure, where its employees provide evidence for the actual expense incurred.
If you would like any advice on this, please contact one of our employment team on 01254 828300 today.