What are the Travel and Subsistence Expenses For Limited Company?

The tax treatment of travel and subsistence expenses for limited companies can be surprisingly complex. This article will guide you through the key points, updated for the 2024/2025 tax year, on tax-free payments for business journeys and qualifying travel expenses.

 

1. Tax-Free Business Journeys

Employees of a limited company can receive tax-free payments for business-related journeys. Employers can reimburse employees tax-free for their travel costs, or employees can claim tax relief on any unreimbursed expenses via their Self Assessment.

Notably, an employee’s ability to make cost savings on a journey does not reduce their claimable amount. For example, if an employee typically drives 10 miles to the office but needs to drive 50 miles from home to a client, they can claim the full 50 miles as a business expense, not just the excess 40 miles.

For employees using their personal vehicles for business, the HMRC-approved mileage allowance remains:

• 45p per mile for the first 10,000 miles per year, and
• 25p per mile thereafter.

These rates include a portion for fuel, for which VAT can be reclaimed by the employer when supported by valid receipts.

2. Qualifying Travel Expenses

Employees can claim travel costs incurred in performing their duties or for travel to a location they must attend for work purposes, provided it is not considered regular commuting to their permanent workplace or personal travel.

• Site-Based Employees: Employees who travel from home to a temporary site can claim the full travel cost, provided the assignment at that site is not expected to exceed 24 months. If they know the position will exceed 24 months, the claim no longer qualifies from the point this is determined. This differs from regular travel to a permanent workplace, which does not qualify for tax relief.
• Subsistence Costs: Costs for meals, accommodations, car parking, tolls, and congestion charges related to qualifying travel are also deductible.
• Private Diversions: A minor diversion for personal reasons, such as shopping on the way home, does not disqualify a business journey if the primary reason for the trip was work-related.

3. Permanent vs. Temporary Workplaces

A permanent workplace is typically the regular location where the employee performs their duties. HMRC defines it as any place where the employee attends regularly in the course of work duties. There is no time restriction for this classification, nor is there a “temporary purpose” consideration.

• Multiple Permanent Workplaces: An employee can have more than one permanent workplace. As a general guide, if more than 40% of their time is spent at an additional location, that location may be classified as a permanent workplace. In some cases, spending less time can still qualify the location as permanent, based on the specific facts.

4. Triangular Journeys

If an employee’s journey includes a business-related detour, such as travelling from home to a client and then to the office, the entire route qualifies as a business journey as long as the primary purpose of the journey was work-related.

5. Using a Home Office

When an employee uses their home as an office and it meets HMRC’s criteria for a permanent workplace, then journeys from home to the head office can qualify as business travel. This situation differs from claiming expenses for general home office use and requires a clear distinction.

6. Record-keeping for Business Travel and Subsistence

Employers should maintain detailed records to support all business travel and subsistence claims. A dispensation agreement with HMRC can simplify record-keeping for recurring expenses if this aligns with the business’s expense profile.

 

Disclaimer: All the information provided in this article on travel and subsistence expenses for limited companies, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.