Employers’ reporting requirements for travel expenses (490: Chapter 9)
Find out what the reporting requirements are for an employer reimbursing or paying an employee’s non-exempt travel expenses.
General rule
9.1
An employer reimbursing or paying an employee’s non-exempt travel expenses or who pays directly for an employee’s non-exempt travel should:
- report details of the payments to us on form P11D by 6 July after the end of the tax year or on a Full Payment Submission (FPS) if the employer is registered to payroll benefits
- provide the employee with the details, or a copy of the P11D report, also by 6 July after the end of the tax year
- provide the employee with details on payslips or a statement or letter if the employer is registered to payroll benefits
- report details of Class 1A National Insurance contributions on form P11D(b)
References here and elsewhere to form P11D apply equally to equivalent returns, including returns in an alternative format agreed with us.
9.2
Employers must also report the cash equivalent of any non exempt benefit including travel benefits – for example, the provision of overnight accommodation or other travel facilities.
Exceptions to the general rule
9.3
Details do not have to be reported on form P11D or an FPS if the payments are:
- not taxable
- covered by an exemption (see paragraphs 10.1 to 10.9 of Expenses exemption and PAYE Settlement Agreements (Chapter 10)
- included in a PAYE Settlement Agreement (PSA) (see paragraphs 10.10 to 10.12 of Expenses exemption and PAYE Settlement Agreements (Chapter 10)
The rules for reporting mileage expenses payments made to employees using their own vehicle for work are different to the general rules on reporting payments. See paragraph 9.12.
What employers have to report
9.4
Except for those items detailed in paragraph 9.3, employers must report on the P11D or an FPS the:
- full amount of any cash payment made direct to employees (or to some other person to settle a bill in the employee’s name) to meet the cost of travel - but see paragraph 9.12 for details of the special rules for mileage allowance payments for business travel in the employee’s own vehicle
- cost of any travel tickets, accommodation, meals or other travel facilities purchased by the employer and used by employees
- cash equivalent of any in-house provision of transport, accommodation, meals or other travel facilities to employees
- cash equivalent of any travel facilities the employer arranges to be provided by a third party
9.5
In every case (unless covered by an exemption or included in a PSA), the amount to include on the form P11D or an FPS is the amount of the payment or cash equivalent before any tax relief to which the employee may be entitled.
The only exception to this is for mileage allowance payments for travel in the employee’s own vehicle, where the rules require an employer to include the excess over the tax-free amount when completing form P11D or an FPS.
For more information see Appendix A.
Round sum allowances
9.6
If an employer pays an employee a round sum allowance for business travel, we do not regard it as a reimbursement of actual expenditure incurred. The whole of the allowance should be treated as gross pay for PAYE purposes.
However, where HMRC agrees, within an approval notice (see paragraphs 10.1 to 10.9 of Expenses exemption and PAYE Settlement Agreements (Chapter 10)), that the payment is clearly intended to do no more than reimburse an employee for an expense actually incurred in the performance of their duties the employer can pay the allowance without deducting tax and National Insurance contributions.
Before doing this, HMRC will need to be satisfied that the allowance will do no more than reimburse the costs incurred.
For guidance on the National Insurance contributions position, see the latest edition of the CWG2.
Example
Bill’s employer pays him up to £18 a night to cover the cost of an evening meal when he has to stay away overnight on business.
The employer only allows him to claim the amount he has actually spent, up to this limit to purchase his evening meal – not, for example, if he is taken out to dinner by a client.
As the employer agrees that this payment is designed to do no more than reimburse expenditure actually incurred the payment is exempt and does not need to be reported on form P11D or be subject to tax and National Insurance contributions.
Example
Tracy is a safety inspector who travels regularly on business. Her employer pays her £300 to cover the cost of her hotel room and evening meal, regardless of how she spends it, and does not seek repayment of any amount not spent. She rarely spends more than £150.
Tracy’s employer must deduct tax and National Insurance contributions on these round sum allowances. Tracy can claim tax relief for the full cost of her business travel at the end of the tax year.
Reimbursement of travel expenses
9.7
An employer does not have to deduct tax and National Insurance contributions on payments to employees in respect of business travel where the amounts paid are exempted from charge because they:
- do no more than reimburse costs actually incurred in making a business journey
- are based on an agreed ‘scale rate’ within an approval notice and designed to do no more than meet expenses actually incurred
9.8
Where a payment to an employee in respect of business travel:
- exceeds the expenses actually incurred
- is based on a scale rate that HMRC has not agreed as clearly designed to do no more than meet expenses actually incurred
- is a round sum allowance that HMRC has not agreed the full amount of the payments must be included as gross pay for tax and National Insurance contributions purposes
Except for business mileage, where special rules apply, the employee will still be entitled to tax relief for the full cost of business travel incurred.
Example
Neil’s employer pays him a round sum allowance of £35 to cover the costs of a journey he makes from his employer’s office in Reading to visit the employer’s other office in Windsor.
The employer has no agreement with HMRC in respect of travel payments. Neil only spent £28 on his travel and subsistence costs, and the employer does not seek a repayment of any amount that Neil does not spend.
The employer should subject the whole of the payment to PAYE. Neil is entitled to claim tax relief for the travel costs that he did incur for business miles that he has travelled. See paragraph 5.16 of The amount of tax relief (Chapter 5).
9.9
Where an employer pays for the cost of an employee’s ordinary commuting journey the full amount of the payments must be included as gross pay for tax and National Insurance contributions purposes.
Provision of travel facilities
9.10
Where, instead of reimbursing travel expenses, an employer:
- meets directly an employee’s liability, for example by paying a hotel bill
- provides vouchers (such as rail or air tickets) or a credit card for the employee to buy travel facilities
The provision of this facility will be covered by the exemption for paid or reimbursed expenses (see paragraphs 10.1 to 10.9 of Expenses exemption and PAYE Settlement Agreements (Chapter 10)).
9.11
Example
Beverley attends a staff conference to review the year’s results. She travels by train to the conference venue using a ticket supplied by her employer.
Accommodation is provided in a facility owned by Beverley’s employer and meals provided at the conference venue are paid for directly by Beverley’s employer.
Beverley will be entitled to tax relief for the full costs incurred (by her or by her employer on her behalf).
Payments to employees for using their own vehicles for work
9.12
Employers must use a special system for working out and reporting any taxable part of all payments made to employees for the expenses of business travel in privately owned cars, vans, motorcycles and cycles.
For more details about these rules, see How to tax business travel for employees (480:Chapter 16) or the CWG2: further guide to PAYE and National Insurance contributions.
Table of reporting requirements
9.13
A table setting out what employers have to report for tax and National Insurance contributions is at Appendix A.