Travel and Subsistence for Directors and Employees
There appears to be confusion in some quarters, particularly in the context of umbrella companies, between the notion of a “dispensation” and an “allowable expense”.
If such an expense is incurred on behalf of an individual on the payroll, the standard procedure is to account for it as a benefit in kind on the P11D form, and then claim the notional personal tax back under S336 ITEPA2003 (what was S198 of the Taxes Management Act 1970 – indeed everyone still refers to these as “S198 claims”) on the individual’s Self-Assessment return. This typically happens when the individual pays for something out of their own pocket, and is reimbursed (effectively tax-free) by the company.
This involves a degree of paperwork resulting in no actual tax being paid, so the Revenue sometimes issues “dispensations”. A dispensation essentially says “if you spend up to this amount on this activity, you do not need to account for it on your P11D or make a S198 claim on your income tax self-assessment form”. However, a full record of the expenditure, in the form of a receipt, must still be kept, and the amount of the expense is then offset against the turnover in the usual way when calculating profit for Corporation Tax purposes.
A dispensation is simply a way of reducing administration and should not be viewed as a way to claim carte blanche on all types of un-receipted expenses.
Some of the main areas you will need to consider are:
An employee with a permanent workplace
Many employees have a place of work which they regularly attend and make occasional trips out of the normal workplace to a temporary workplace. Often an employee will travel directly from home to a temporary workplace and vice versa. An employee can claim full tax relief on business journeys made.
A business journey is one which either involves travel:
- from one place of work to another or
- from home to a temporary workplace or
- to home from a temporary workplace.
Journeys between an employee’s home and a place of work which he or she regularly attends are not business journeys. These journeys are ‘ordinary commuting’ and the costs of these have to be borne by the employee. The term ‘permanent workplace’ is defined as a place which the employee ‘regularly’ attends. It is used in order to fix one end of the journey for ordinary commuting. Home is the normal other end of the journey for ordinary commuting
