EIM66205 - Tax treatment of lorry drivers: employer guidance: scale rate payments to drivers
As an employer, you can either reimburse your drivers for their actual travel costs incurred when staying away from home or a set rate, for example benchmark scale rates for meal allowances or a lorry driver’s overnight subsistence allowance.
Whether you are reimbursing actual costs or paying a set rate, your employee must have actually incurred a qualifying expense during their journey.
Checking system
Whether you are reimbursing actual costs or paying scale rates the employee must actually have incurred a qualifying expense.
When paying the scale rate payments you may want to check all claims or a sample of claims, depending on the type of checking system you have in place. For further information about checking systems, see the frequently asked questions.
Removal of checking requirement for benchmark scale rates from 6 April 2019
From 6 April 2019, employers will no longer be required to operate a system for checking an employee’s expenditure in order to make payments free of tax in relation to expenses paid or reimbursed using benchmark scale rates. Instead, employers will only be required to ensure that employees are undertaking qualifying travel on occasions in respect of which a payment is made or reimbursed and that neither the employer nor any other person knows or suspects or could reasonably be expected to know or suspect, that travel was not undertaken. See EIM30225.
A checking system will however still be necessary if subsistence payments are made using bespoke rates.
The following 6 options are open to employers for the reimbursement of expenses.
1. Benchmark scale rate payments
Where an employee has to spend money as a result of a business journey in the UK, and incurs an allowable expense while on that journey, you can pay up to the maximum published benchmark scale rates for day subsistence, in respect of travel. You do not need to have an agreement with HMRC in place, known as an approval notice, to reimburse these amounts. However, up until 5 April 2019, you will need to have a checking system in place to ensure employees are actually incurring expenses while travelling.
From 6 April 2019 employers will no longer be required to operate a system for checking an employee’s expenditure in order to make payments free of tax in relation to expenses paid or reimbursed using benchmark scale rates. Instead, employers will only be required to ensure that employees are undertaking qualifying travel on occasions in respect of which a payment is made or reimbursed and that neither the employer nor any other person knows or suspects or could reasonably be expected to know or suspect, that travel was not undertaken. See EIM30225.
For overseas travel, see option 5.
| Minimum journey time | Maximum amount of meal allowance |
|---|---|
| 5 hours | £5 |
| 10 hours | £10 |
| 15 hours (and ongoing at 8pm) | £25 |
Where a benchmark scale rate of £5 or £10 is paid and the qualifying journey lasts beyond 8pm, a supplementary rate of £10 can be paid to cover the additional expenses necessarily incurred as a result of working late.
2. Agreed industry scale rate –lorry drivers’ overnight subsistence allowance
You can apply to HMRC for an approval notice to use the agreed haulage industry scale rate for overnight stays away from home. This is currently £34.90, or 75% of this figure (£26.20) where the driver uses a sleeper cab, and incurs subsistence expenses after starting their journey. These are the maximum amounts that can be paid free of Income Tax and NICs under the agreed industry scale rate.
You will also need to have a checking system in place to ensure periodic checks are carried out on a sample of employees. This is to ensure employees are incurring expenses for meals and other subsistence costs while travelling, and that the payment remains a reasonable estimate of the costs usually incurred. A meal is a combination of food and drink in accordance with a normal dictionary meaning of the word.
3. Bespoke agreements
If your company wishes to pay more than the agreed industry scale rate, you will need to apply for an individual bespoke scale rate. You will be required to do a sampling exercise to establish a reasonable estimate of the expenses actually incurred by your employees after starting their journey. This can be for daily subsistence, overnight subsistence costs or both. Further information on sampling requirements to agree bespoke rate can be found here.
You will need to have a checking system in place in order to periodically randomly check expense claims. The checks will ensure that the payments remain a reasonable estimate of the costs actually incurred and are not excessive.
4. Other allowances
You can also pay or reimburse employees incidental overnight expenditure where they incur additional incidental costs on journeys when staying away from home (up to £5 per night for overnight stays in the UK and up to £10 for overnight stays abroad). This is in addition to the arrangements detailed above.
Where your employees have multiple nights away from home in a single continuous trip, the maximum claim per night for overnight stays is averaged for the whole trip, rather than calculating it for each night. For example, if your employee is away from home for 3 nights in the UK, the limit is £15 for the 3 nights. You can reimburse more than £5 for any given night as long as the total reimbursement for the 3 nights does not exceed £15. If a payment is made that exceeds these limits, the whole payment becomes taxable and not just the excess.
5. Overseas scale rates
HMRC publishes overseas scale rate payments for employees who stay away from home overnight outside the UK. Up to 5 April 2019, you do not need to apply for an approval notice or check evidence of actual spending to reimburse the overseas scale rates. However, from 6 April 2019 you must ensure that employees are undertaking qualifying travel.
6. Direct expenses claims
You may instead decide to pay or reimburse actual expenditure, where your employees provide evidence for the actual expense incurred.
Summary
| Options | Should I have an approval notice? | Do I need to do sampling to agree an amount for the scale rate I want to pay? | Do I need a regular checking system? | Can be used in the UK and abroad? |
|---|---|---|---|---|
| 1. To use benchmark scale rate payments | No | No | No, but you should ensure employees are undertaking qualifying travel (from 6 April 2019) | Yes |
| 2. To use the agreed industry scale rate overnight allowance of £26.20 (or £34.90 for employees not staying in sleeper cabs) | Yes | No | Yes | Only in the UK |
| 3a. To use a bespoke scale rate already agreed with HMRC between 5 April 2011 to 5 April 2016 | Yes | No | Yes | Yes |
| 3b. To use a new bespoke scale rate | Yes | Yes | Yes | Yes |
| 4. To use incidental overnight expenses | No | No | No | Yes |
| 5. To use overseas scale rate payments | No | No | No, but you should ensure employees are undertaking qualifying travel (from 6 April 2019) | Only abroad |
| 6. To pay back employees actual expenses | No | No | You should check employees evidence of expenses | Yes |