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HMRC Benchmark Scale Rates vs Reimbursing from Receipts

Client (sole director of limited company) has dispensation for the company from HMRC which covers:

- Subsistence (including meals when undertaking business travel, supported by receipts) and

- HMRC Benchmark Scale Rates for Day Subsistence (£5 for one meal, 5 hours away; £10 for two meals; 10 hours away etc)

My client frequently travels on business and is usually away from his home for around 8-10 hours, and will usually purchase lunch while he is at the temporary site.

Does the company need to decide whether to use one method of expense reimbursement or the other, or are both allowed to be used depending on the cost in question?  For example, if the client spent £3.50 on lunch it would be more tax efficient for him to claim the £5 scale rate allowance from the company. If his lunch cost over £5, it would be more tax efficient for him to claim the exact cost of the lunch from the business.

I cannot see any reference to this in the dispensation notice, but would appreciate clarification on this point.

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23rd Jan 2013 15:34

Scale rates and expenses

The benchmark rates are the amounts that can be claimed without having to complete a P11D. If the company reimburses more than the amount agreed on the dispensation, then it becomes reportable and the excess is chargeable to tax and NIC.

If the company is consistently reimbursing more on legitimate subsistence than the benchmark rate then the company should revisit the dispensation application and ask for a higher allowance for subsistence to be included. 

If the director spends less than the benchmark rate, only the actual cost should be reimbursed. 

In both cases the reimbursement should be supported by the receipt. 

 

 

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23rd Jan 2013 16:18

Not sure I quite agree.

Thanks Brightster, but I am not sure I quite agree with your response.

The dispensation has two separate sections (amongst others):

- Subsistence and

- HMRC Benchmark Scale Rates for Day Subsistence.  

 

The subsistence section covers "the reasonable and necessary cost of a meal/snack and beverages incurred by an employee wile undertaking travel the expenses of which are included in the section related to Travel"

which would appear to suggest that any amount, as long as it's reasonable, can be claimed when supported by receipts.

 

The HMRC Benchmark Scale Rates for Day Subsistence section explains the current rates (one meal - £5 and 2 meal - £10) and also states that the appropriate "rate may be paid when the employee has undertaken qualifying travel ... and has incurred the cost of a meal."

It does not state that the cost of a meal must be equal to the scale rate payment made, and the point seems to be that receipts must be kept to ensure that a meal cost of some amount has been incurred.

 

Going back to my original question, there is nothing in the dispensation to say one is not allowed to pick and choose different policies for each expense claim. It would appear foolish for a one-man-band limited company director to do anything other than pay himself the scale rate for expenses under £5 (when all he needs to retain is proof that a cost of some amount was incurred) and claim the actual expenditure amount with a receipt as proof for expenses which exceed the scale rate payment of £5.  It is this point which I wish to clarify, before confirming to my client the best way forward with regard to his expenses.

 

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23rd Jan 2013 16:25

HMRC agree with me!

I have called the HMRC Local Compliance office which issued the dispensation and they have confirmed exactly the above.  So, to confirm, it is fine to:

- Pay the actual meal cost when this is more than £5, and this must be supported by receipts.

- Pay the scale rate of £5 (or £10 if for two meals) even if the meal costs less than this.  A receipt must be kept, not as proof of the amount, but as proof that an expense on a meal (or meals) was indeed incurred.  

 

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I also concur

You can either pay the benchmark rate (without receipts necessarily, but evidence of having incurred expenditure) or reimburse the actual expenditure (supported by receipts) on any given occasion.  Obviously you only do actuals if the expenditure exceeds the benchmark rates.

Where I'd agree with Brightster is that if you're habitually incurring expenditure above the benchmark rates, it's possible to agree with HMRC a higher flat rate allowance (usually supported by a sampling exercise).

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10th Oct 2013 18:01

bench mark scheme

another question on this subject, what about VAT, can one claim any?

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