Tax & Accounting News

New rates for subsistence payments

16/06/2009

A new system for claiming day-to-day subsistence expenses was introduced by HM Revenue and Customs on 6 April.

Under the previous rules, an employer was required to notify HMRC of any expenses paid to an employee unless a dispensation – an agreement for the employer to pay an agreed rate for expenses without reporting them to HMRC – was already in place.

With the new system, HMRC has set rates for subsistence expenses, which it will accept for all employers. Employers making subsistence payments up to the advisory rates will be able to do so free of tax and National Insurance Contributions (NICs), without having to agree them with HMRC first.

The rates that can be used are:

• Breakfast rate - A rate of up to £5.00 may be paid where the employee leaves home earlier than usual and before 6am;
• One meal rate - A rate of up to £5.00 may be paid where the employee has been away from his/her home or normal place of work for a period of at least five hours;
• Two meal rate - A rate of up to £10.00 may be paid where the employee has been away from his/her home or normal place of work for a period of at least ten hours;
• Late evening meal rate - A rate of up to £15.00 may be paid where the employee has to work later than usual and finishes work after 8pm having worked his/her normal day.

If an employee is paid an allowance under the five or ten-hour rule, the late meal allowance could still be paid if her or she finishes work after 8pm and buys a meal he or she would usually have at home.
If a higher subsistence rate is paid, without agreement with HMRC, the excess should be subject to tax and NICs.

For more information please contact us.

 

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