Business travel expenses: what you need to know

Business travel expenses - costs incurred while traveling for work - can be complicated to claim. Whether you are an employee seeking reimbursement for a business trip in the UK or abroad, or an employer looking to understand your options for reimbursing travel expenses, this article is for you.

We will cover the essential rules, key categories of business travel expenses, tax treatment, practical guidance for both employees and employers, and tools to streamline the process. Understanding business travel expenses is crucial for ensuring compliance with tax regulations, accurate reimbursement, and effective company policy management.

So buckle in, let's get started.

What are business travel expenses?

Business travel expenses are costs incurred by employees while traveling for professional purposes. These expenses are essential for carrying out work-related duties away from the usual place of work. Common categories of business travel expenses include:

• Transportation: Airfare, train tickets, taxi fares, vehicle rentals, public transport, and toll road charges.

• Accommodation: Hotel rooms, Airbnb, or other lodging expenses.

• Meals: Food and drink consumed during business travel.

• Incidental costs: Laundry services, tips, business communication expenses (such as business phone calls), parking fees, and other minor expenses.

(FYI, speeding fines and parking tickets aren't included.)

Now that we've covered what qualifies as a business travel expense, let's look at how these expenses are treated for tax purposes.

Business travel is normally free from tax

Tax treatment of business travel expenses

Legitimate business expenses are not subject to tax or National Insurance costs. As long as the expenses meet all of the requirements, business travel is normally free from tax.

HMRC states that business travel only covers the following two types of journey:

• Journeys forming part of an employee's employment duties (such as journeys between appointments by a service engineer or to external meetings)

• Journeys related to an employee's attendance at a temporary workplace

So, if you have to visit specific locations to fulfil your job, excluding commuting to your usual place of work, this is business travel for tax purposes.

If your business travel includes an overnight stay, then the costs incurred for this can be claimed. You can also claim for subsistence costs incurred during business travel, for example, a meal at the airport. Incidental costs can also include tips and business communication expenses such as business phone calls.

Next, let's explore how to claim food and drink expenses during business travel.

Claiming food and drink expenses

Meal and drink reimbursement

Meals and drinks can be claimed for if consumed on work journeys outside of your normal commute. These can be reimbursed at the actual cost or the benchmark scale rates set by HMRC.

These rates are the maximum tax-free allowances that can be paid by employers for food and drink costs, and are calculated based on the number of hours that you are away from your normal place of work.

The rates are:

Some qualifying conditions must be met for these rates to be used. These conditions are:

• The travel must be in the performance of an employee's duties or to a temporary place of work

• The employee should be absent from their normal place of work or home for a continuous period in excess of 5 hours or 10 hours

• The employee should have incurred a cost on a meal (food and drink) after starting the journey

After understanding meal and drink claims, let's look at overnight incidental expenses.

Overnight incidental expenses

What can be claimed overnight?

If you stay away overnight while travelling on business, you are entitled to tax-free reimbursement for your personal incidental expenses.

This covers items like private telephone calls, laundry, and newspapers. The amounts are £5 per night if staying in the UK, or £10 per night if staying overseas.

With overnight expenses covered, let's move on to important considerations for employees.

Things to note if you're an employee

Eligibility for tax relief

Similarly to mileage claims, if you incur expenses as a result of work, and these expenses are not reimbursed by your employer, you may be able to claim tax relief from HMRC. Eligible business travel expenses are generally necessary and ordinary business costs.

There are a few conditions that must be met:

• You personally pay for a necessary work cost

• This cost is only necessary for work

• Your employer doesn't pay you back

• Your employer doesn't offer you a suitable alternative

The importance of separating personal and business expenses

Keep personal and work costs separate to support accurate reporting and expense claims. Separating personal expenses from business expenses is essential for accurate reporting.

The 24 month rule

Under the 24 month rule, if you attend a workplace for more than 24 months and spend over 40% of your time there, it is treated as a permanent workplace rather than a temporary one, and different journeys to that location usually won't qualify.

(Plus, you must be a taxpayer as this is a tax break. 😀)

Now that employees know what to watch for, let's see what employers need to keep in mind.

Things to note if you're an employer

Tax and National Insurance responsibilities

Unless classed as an ‘exemption', you must deduct and pay tax and National Insurance on all expenses and benefits you give to your employees, and report them to HMRC as normal. Employers must keep records of all travel expenses paid to employees.

Exemptions and record-keeping

Business travel is included as an ‘exemption', alongside phone bills, business entertainment, uniform, or tools for work.

To qualify for an exemption, you must either be reimbursing your employee's exact costs or paying the benchmark rate. You don't need to apply for an exemption unless you want to pay bespoke rates to your employees. Tracking these costs should follow HMRC guidelines and company policies, with a clear process for documenting claims. Tracking of business travel expenses must comply with tax regulations and company policies.

Important: If you choose to reimburse your employees' actual costs, the amount reimbursed will only be tax-free up to the amount allowed by HMRC, with evidence such as receipts or a credit card statement. Maintaining accurate records supports tax compliance, reimbursement, and separation of personal expenses from business expenses. If you reimburse employees at higher rates, these would become earnings and therefore are subject to tax and National Insurance.

With employer responsibilities outlined, let's look at international travel expenses.

International travel expenses

Reimbursing international travel costs

If your employees go wild and spend a small fortune on accommodation and meals, and claim the expenses back as business expenses, you have two options:

• You can reimburse them to the exact cost

• You can reimburse them according to the HMRC scale rate payments.

Using HMRC Rates for international travel

The benefit of using HMRC's scale rate payments is that it saves you time, and makes your expense process more straightforward.

Using the scale rate means you do not have to check every single expense receipt (although you should still check a sample) and if your employees travel often, you can set a budget for food and accommodation for all trips rather than for each trip.

HMRC has published a very long list of countries, with applicable scale rates and currencies. See the full list of countries here:

https://www.gov.uk/guidance/expenses-rates-for-employees-travelling-outside-the-uk

If you are unable to find the country visited in the list, then you would use the rates applicable to the city that is geographically closest.

Example: Reimbursing your employee's business travel using scale rates

Your employee, Ana, is away on a business trip to Berlin. She checks into a hotel in the city on Monday at 3pm, and leaves on Thursday morning after breakfast, on the 9am flight.

You wish to reimburse her according to the HMRC overseas scale rates, which will cover the cost of her meals, accommodation and transport to the office.

For the 48 hours between Monday 3pm to Wednesday 3pm:

2 x €72 (24 hour rate)

= €144

For the 18 hours between Wednesday 3pm to Thursday 9am:

1 x €167.50 (room rate for Wednesday night)

1 x €65.50 (10 hour rate for 3pm Weds to 9am Thurs)

= €233

Total reimbursement for Ana's trip:

= €377

Now that you know how to handle international travel expenses, let's see how Expend can help streamline the process.

How does Expend help?

Expense management platform features

There is another way to handle business travel claims. Reimbursing your employees often involves a lengthy process with forms or spreadsheets, bank statements and paper receipts. Plus your employees are out-of-pocket for their travel expenses, until they are reimbursed.

Expend is an all-in-one expense management platform that works on any device for any expense type, payment method, currency and business. Plus, for employees who regularly incur expenses, having an Expend business expense card means they never have to wait around to get reimbursed again, while our business expense management software keeps every transaction under control.

Each smart Mastercard enables you to set spending limits per employee on a daily, weekly or monthly basis and block spending at certain retailer types, such as pubs and bars.

Restricting ATM withdrawals or online transactions and instant card locking gives you peace of mind - leaving no room for misuse.

Employee benefits

Through the Expend app, your employees can easily submit any expense from any payment type while on-the-go - attaching receipts, notes and assigning expenses to a client or job number within seconds, enabling them to keep on top of their expenses on a daily basis using our business expense and receipt scanning app and following the guidance in our Expend card and app help guide.

Once an expense is uploaded, a manager can either approve or deny it. This allows you to see what your workforce is claiming and to flag any inconsistencies or problems as soon as they're spotted.

In summary:

• Business travel expenses are costs incurred by employees while traveling for professional purposes, with common categories including transportation, accommodation, meals, and incidental costs.
  

• Tracking of business travel expenses must comply with tax regulations and company policies, and separating personal expenses from business expenses is essential for accurate reporting.
  

• Maintaining accurate records of business travel is crucial for tax compliance and reimbursement.
  

• Establishing clear corporate travel policies helps manage business travel expenses effectively, ensuring both employees and employers remain compliant and efficient in handling business travel claims.