To claim or not to claim - baffled by subsistence expenses?

Travel and subsistence expenses

We are not alone at SAIL in reporting that one of the most frequently asked questions by contract and freelance workers are regarding the rules defining a 'temporary workplace'. The key concern is to ensure people are correctly accounting for their travel and subsistence expenses.

Queries often arise concerning the perceived inequalities of subsistence expenses such as food and accommodation. An example is of an individual who is out for the day travelling for business can claim a tax deduction for a lunch they purchase on the go but someone who prepares a packed lunch at home to take with them can claim nothing.

The special foreign travel rules which allow deductions beyond the basic travel rules are complicated and very subtle. HRMC notes that ‘in many cases a deduction is due’ without listing the examples. It goes on to list contradictory sections where travel may or may not be deductible.  

But there is no need to leave our shores to see examples of the travel rules confusion. Some employers have received some unhelpful decisions from HMRC with regard to workplaces in London. HMRC have declared that all of London (within the M25 perimeter) is one workplace even though two workplaces could be one-two hours apart yet still within the London conurbation.

The Office of Tax Simplification (OTS) has recently published 'Review of employee benefits and expenses:  Interim report' as part of their remit to report areas of complexity and recommend priorities for further review.

The OTS were struck by the number of relatively minor things that are proving problematic. It believes that making a number of relatively small changes could make a big difference. Some ideas on how to effect change would need legislation but others just need a change in approach by HMRC. With this in mind the OTS have come up with 43 'quick wins' including:

Area	Proposed Solution	Needs Legislation?
Trivial benefits	HMRC should publish a list of benefits they consider to be trivial, presumably with limits on the amounts.	No
Mileage rates	Align tax and NIC treatment of mileage rates over 45p.	Yes
Mileage rates	HMRC should not require retention of fuel VAT receipts for expenses claims where only a mileage rate has been claimed.	No
Subsistence rates	HMRC should give better guidance on what qualifies for subsistence expenses.	No
Subsistence rates	HMRC should reinstate the practice of having a 'friends and family' scale rate.	No
Travel and subsistence	HMRC should commit to revising and updating the booklet 490 to fit better with modern working patterns.	No
Travel expenses	HMRC to publish guidance on temporary workplace rules for projects carried out in phases.	No
Travel expenses	HMRC should stop treating London as one workplace regardless of travel time.	No

 

The OTS and Treasury Ministers have been in discussion over the summer with plans to publish their recommendations in stages before the end of the year and early into 2014.

The key as users is results. Discussion is good, but the proof of the pudding is in the eating. We at SAIL Business Solutions will be keeping our clients aware of updates and ensuring that they are fully compliant with the changing legislation.

As ever, if you are not getting the service you should be from your contractor accountant, contact us and find out why 96% of our clients say and do recommend SAIL.