For many businesses, regular employee travel is an essential part of their operations. Whether it is generating new customers, servicing existing ones or attending conferences and other events, travel often incurs a number of ad hoc expenditures. If a company pays for these expenditures on behalf of their employees, they will have tax, national insurance and reporting obligations.

As the deadline for employers to file P11D forms to report employee benefits and expenses relating to 2017/18 approaches, you’ll need to know your company’s reporting obligations for tax and national insurance.

What is travel and subsistence?

Travel Subsistence
Providing travel to your employees Food and drink
Reimbursing employees for the money they spend on travel Other costs related to traveling such as business calls, parking charges and tolls

However, not all costs while travelling will count as travel and subsistence expenses for tax purposes. It is important to know what constitutes a taxable expense and what doesn’t before employees leave.

What are the exemptions?

All costs of travel that you cover for employees have to be reported to HMRC, although there are a number of exemptions.

Public transport costs don’t have to be reported to HMRC if you are contributing to a subsidised or free public bus transport for your employees to travel to and from work.

Other exemptions include:

  • Non-regular taxi journeys
  • Bicycle costs
  • Temporary taxi replacements for car share schemes that are unavailable
  • A work-supplied bus service
  • Travel to work when public transport is disrupted by industrial action
  • Travel for an employee with a disability (under certain circumstances)
  • Mileage rates paid in accordance with HMRC statutory rates for use of your employee’s own car

How do you report it?

Business travel

Some business travel expenses are covered by exemptions. This means you won’t have to include them in your end-of-year reports. If you don’t have an exemption, you must report the cost using a P11D form. You don’t have to deduct or pay any tax or National Insurance.

Any reimbursements to your employee above and beyond the cost of their business travel will be classed as earnings, so:

  • Add it to your employee’s other earnings
  • Deduct and pay PAYE tax and Class 1 National Insurance through payroll

Private travel

Non-business travel, including the journey to and from work, is considered private travel and is treated differently in terms of tax and other deductions. If you arrange the transport and pay for it on behalf of your employees, you must report the cost on a P11D form and pay Class 1A National Insurance on the value of the benefit.

If your employee arranges it and you pay the supplier directly, you should report the cost on a P11D form and add the cost of the transport to the employee’s other earnings and deduct and pay Class 1 National Insurance (but not PAYE tax) through payroll.

Alternatively, if your employee arranges and pays for the transport and you reimburse them, the money you pay them counts as earnings. Therefore you should add it to your employee’s other earnings and deduct and pay PAYE tax and Class 1 National Insurance through payroll.

Public transport

As long as the public transport costs are not exempted costs, they too will have to be reported to HMRC and have any tax or National Insurance deductions made.

If you cover the costs of your employee’s season tickets, this needs to be reported using a P11D form. You then need to add this to your employee’s other earnings and pay Class 1 National Insurance but not PAYE.

Salary sacrifice

Employers that provide travel and subsistence benefits that are part of a salary sacrifice scheme still need to report the costs to HMRC. Business expenses from 2017/18 that aren’t covered by exemptions, will need to be included on your P11D form before the 6 July 2018 deadline.

With the deadline approaching, we understand this is a lot to get your head around and that’s why we’re here to help. If you have any questions around reporting travel and subsistence, then contact your local Champion office today.