Lambert Chapman LLP's Kim Payne looks at the HM Revenue and Customs Advisory Benchmark Scale Rates for Subsistence Expenses

HM Revenue & Customs (HMRC) has introduced an advisory system of benchmark scale rates which employers can use to make subsistence payments free of tax and National Insurance contributions (NICs), to employees who incur allowable business travel expenses The new advisory system was implemented for operation from 6 April 2009.

The advisory system only covers benchmark scale rates for day subsistence payments. If an employer wishes to pay subsistence to employees who have to stay overnight they can either reimburse the actual cost incurred by the employee or agree in a Dispensation with HMRC a tailored scale rate to cover meals and other expenses.

The benchmark scale rates that apply from 6 April 2009 are as follows:

Description	Amount (up to)
Breakfast rate	£5
One meal (5 hour) rate	£5
Two meal (10 hour) rate	£10
Late evening meal rate	£15

Breakfast rate – The rate may be paid where an employee leaves home earlier than usual and before 6.00 am and incurs a cost on breakfast taken away from his home after the qualifying journey has started. If an employee usually leaves before 6.00 am the breakfast rate does not apply.

Late evening meal rate – The rate may be paid where the employee has to work later than usual, finishes work after 8.00 pm having worked his normal day and has to buy a meal before the qualifying journey ends.

The breakfast and late evening meal rates are for use in exceptional circumstances only and are not intended for employees with regular early or late work patterns.

One meal (5 hour) rate – The rate may be paid where the employee has been undertaking qualifying travel and is away on such travel for a period of at least 5 hours and has incurred the cost of a meal.

Two meal (10 hour) rate – The rate may be paid where the employee has been undertaking qualifying travel and is away on such travel for a period of at least 10 hours and has incurred the cost of a meal or meals.

Benchmark scale rate payments must be limited to three meal rates in one day or in a 24 hour period. A meal is defined as a combination of food and drink and would take a normal dictionary meaning. Where employees are required to start early or finish late on a regular* basis, the over 5 hour and 10 rates can be paid provided that all the other qualifying rules are satisfied.

Overnight subsistence rate - A benchmark rate has not been set for overnight subsistence. It will still be necessary to agree a rate, if applicable, with HMRC.

Staying with friends and family rate – A benchmark scale rate has not been set for payment for staying with friends and family. Furthermore, HMRC no longer accepts that a scale rate payment for this purpose should be agreed with an employer as part of a Dispensation. The travel rules still apply to actual costs of subsistence incurred while staying with friends and family.

*Regular Travel - The word ‘regular’ takes its ordinary dictionary meaning; it is something that recurs at fixed times, is periodic or is habitual.

Example 1

A travelling salesman whose normal working day is from 8.30 am to 5 pm is called upon to attend a meeting every Monday, which normally lasts until 8 pm and a breakfast meeting each Friday, which starts at 7 am and means that he has to leave home at 5.45 am. He qualifies for relief for travel expenses and therefore a scale rate payment because HMRC accepts that he travels in the performance of his duties. Both the Monday and Friday meetings are habitual and recur at fixed times. The breakfast and evening meal rates will not apply. He will still be entitled to the one meal and two meal rates.

Example 2

A lorry driver whose normal working day is from 8.30 am to 5 pm is called upon occasionally by her employer to make extra deliveries in a day meaning that she starts work at 7am (and leaves home before 6 am) and finishes after 8 pm. HMRC would accept that the frequency of these extra duties is not regular. She will be entitled to the one and two meal rates and the breakfast or evening meal rate. She can not receive the benchmark scale rates for more than 3 meals in one 24 hour period.

Example 3

A travelling engineer who normally works from 8.30 am to 5 pm is called upon once or twice a month to meet different customers in the evening. These meetings often finish after 8 pm. HMRC would accept that the frequency of the meetings is not regular for these purposes. He will be entitled to the one and two meal rates and the evening meal rates on each occasion that he works after 8pm and incurs the cost of an additional qualifying meal.

What you have to do if you want to pay scale rates to your employees?

You will need to apply to HMRC for a Dispensation, or if a Dispensation is currently held you can request for this to be amended to include the Benchmark Scale Rates. An employer will need to keep sufficient records to be able to demonstrate that the employee was entitled to the payment.  The employer also needs to be able to demonstrate that routine checks are undertaken to ensure that the travel expenses rules are being followed.

If as an employer you would like to use the Subsistence Benchmark Scale Rates please contact Kim Payne on 01376 326266 in our Tax Department for further details and assistance with obtaining a Dispensation from HMRC to cover these payments.

 

Date:28 October 2009

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