Tax free payments to Employees – make use of them!

27th Apr 2010

Emma Glover, Tax Partner, explains the Revenue’s benchmark scale rates which employers can use to make subsistence payments to employees who incur costs of food while out working free of tax and National Insurance contributions (NICs). The system only suggests scale rates for day subsistence payments and therefore overnight stays must be dealt with separately.

Benchmark system/rules
HMRC has set rates for meal expenses that it will accept for all employers. As long as the employee has incurred subsistence expenses while travelling on an allowable business journey, employers can make tax and NIC free subsistence payments up to the advisory rates without agreeing them with HMRC. Employers wishing to make such payments will simply need to notify HMRC of their intention by ticking the appropriate statement on their dispensation application before starting to use the system. The rates are:
 
  • Breakfast rate (irregular early starters only) - A rate of £5 may be paid where a worker leaves home earlier than usual and before 6.00 am and incurs a cost on breakfast taken away from his home
  • One meal rate (Five hour rate) - A rate of £5 may be paid where the worker has been away from his home or normal place of work for a period of at least five hours and has incurred a cost on a meal.
  • Two meal rate (Ten hour rate) - A rate of £10 may be paid where the worker has been away from his home/normal place of work for a period of at least ten hours and has incurred a cost on a meal or meals.
  • Late evening meal rate (irregular late finishers only) - A rate of up to £15.00 may be paid where the employee has to work later than usual.
 
This article only provides a broad summary of the rules and cannot be relied on without specific advice about the related quirks in the rules. Emma can be contacted on 0191 411 2468 or emma.glover@rowlandsaccountants.co.uk.

Author: Emma Glover (emma.glover@rowlandsaccountants.co.uk)

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