Claiming meal allowances has been brought into the twenty-first century.  As part of the tax simplification of employer benefits and expenses a new meal allowance will be introduced from 6 April 2016.

The new system will replace the current system of entering the expenses on a P11D or applying for a dispensation; which is what Clearways Accountants do for their clients.

The new regulations

The new regulations set a maximum amount that can be paid for meals that will qualify for tax exemption.  The travel costs can also be claimed by the employee and if you are away on business overnight you can also claim the flat rate for incidental expenses.

The new amounts…

One meal allowance per day can be paid in respect of business travel.  The amount cannot exceed:

  • £5 where the duration of the travel is five hours or more
  • £10 where the duration of the travel is 10 hours or more
  • £25 where the duration of the travel is 15 hours or more and is on-going at 8pm.

An additional allowance not exceeding £10 per day can be claimed if the travel is on-going at 8pm and the duration of the travel is 10 hours or less.

Example 1

A contractor commutes to London taking the 7.30am train in the morning and arriving at the client’s at 8.30am.  The contractor gets the 6pm train in the evening arriving back home at 7pm.  In total the contractor is out of the house from 7.15am to 7pm; just under 12 hours and therefore qualifying for the £10 per day rate.

Example 2

A contractor works in the IT sector and a new project is going through final testing.  The testing starts largely at the end of the working day and finishes in the evening at abut 9pm.  The commute is 1 hour door-to-door.  In order to start testing at 4.30pm, our contractor leaves the house at 3.30pm.  On finishing the testing our commuter arrives home at 10pm.  In this situation the contractor is out of the office for 6 1/2 hours.  This qualifies for the £5 allowance.  As the work is still on-going at 8pm a further £10 can be claimed.

Example 3

Our contractor has been asked to visit a different office of the client, this will entail an overnight stay.  The contractor leaves home at 7.30am and travels to the client site.  Attending meetings for the day and staying in a local hotel for the evening.  The next day the contractor attends further meetings and arrives back home at 7pm.

On the first day of travel the contractor is away for 15 hours or more and therefore can claim the £25 per day rate.  The costs of the hotel and mileage (or train fare) can also be claimed.  The contractor can also claim for incidental overnight expenses at £5 per night in the UK (or £10 overseas).

On the second day the contractor is away for over 10 hours and can therefore claim the £10 per day rate.

In total the contractor could claim for: hotel costs, travel expenses, meal allowances of £35 and an incidental overnight of £5.

Staying overseas?

There is a list of HMRC approved overseas subsistence rates based on the location of your business trip, click here.

Records to keep

Most commutes are standard (trains permitting) and therefore as a contractor you will be claiming the same amount every day.   If you are out on business for longer than usual or making an unusual trip you should make a note on your accounting spreadsheet.  The information will then be available should HMRC ever come knocking!

If you would like any further advice on expenses and running your contractor company then please call us on 01737 244298 or use the contact form below.