Taxable subsistence payment prior to employment

Didn't find your answer?

An individual who is due to start working for a company from 1 May 2024 is being sent on a two-week training course in February 2024. The company has generously decided to pay him a subsistence allowance of £65 per day for evening meals (accommodation, breakfast and lunch is included in the course fee).

This is clearly in excess of HMRC subsistence rates - normally I'd advise subjecting the excess to PAYE/NI, however in this case the individual is not yet an employee. Would it be best to treat it as an advance and subject it to PAYE/NI after their employment has commenced?

Replies (9)

Please login or register to join the discussion.

DougScott
By Dougscott
08th Feb 2024 11:48

Would it be possible to treat it as a payment to a supplier/contractor if that person raises an invoice? Then the company avoids any PAYE complications, working out actual taxable benefits.

Thanks (1)
avatar
By David Ex
08th Feb 2024 11:49

Point that occurred to be is whether the individual is being paid his salary for the fortnight.

Effectively the employment has commenced in my view.

Thanks (0)
Replying to David Ex:
avatar
By Leywood
08th Feb 2024 11:54

+1

Thanks (0)
Replying to David Ex:
avatar
By Bobbo
08th Feb 2024 12:34

+1

Also, depending on the age of the employee the "generous" £65 per day allowance is potentially below NMW... maybe not so generous.

Thanks (0)
Replying to David Ex:
avatar
By Ben McLintock
08th Feb 2024 13:26

Excellent point - I agree he needs to be paid for the fortnight!!

Thanks (0)
Replying to David Ex:
DougScott
By Dougscott
08th Feb 2024 23:03

Good point but it doesn't answer the OP's question and we don't know what is behind this agreement. It may be the potential employee has agreed to this position, perhaps becuase they need to meet certain requirements of the job, so the question still needs answering about how to treat this payment.

Thanks (0)
avatar
By taxdigital
09th Feb 2024 08:31

‘Related employment’ can also be one which the employee ‘can realistically expect to have a serious opportunity of holding in due course’. (s.251(2)(c).

Thanks (1)
avatar
By C Graham
12th Feb 2024 11:55

Can't be an advance as not an employee. It is a payment made outside of the employment. Anticipation in lieu of meals/subs and said person should invoice the company (future employer) for the total.

Even if an employee, this payment is specifically to cover expenses during training so why would that be subject to tax/ni. It is not like an ongoing car allowance and there's no derived benefit.

Employer covers the costs of training. But individual has not commenced employment if the start date of the signed contract is 1st May. Probation will start from that date - not from the date the person attended the course. The company still holds risk that the person could decide not to turn up though there may be some agreement on the side that the course fees would then be recoverable.

Person doing the course is not performing the duties of their employment during the training presumably. Comment that the role requires therefore the mention of living wage is not applicable. He/she is receiving tuition and studying at the company's expense - likely that the job offer was made subject to satisfactory completion of the course.

It certainly is not an advance of salary because he/she has not commenced their employment at this stage . So no contractual salary exists.

Rules obviously v different if an employee and mandatory training.

Thanks (0)
avatar
By kim.shaw-and-co.com
13th Feb 2024 00:48

The most straightforward way of dealing with it would likely be to add the individual to payroll as a temporary worker and run the 'round sum allowance' through it as earnings. Cease the 'employment' and take them on again (hopefully with a P45) in 2024/25. It's less than a grand and likely not worth messing around over.

Thanks (0)