Per Diem in the UK 101
Let’s start with the basics. Aside from being a Latin word, Per Diem does not refer to trips to Rome, even though that’s where the expression originated. It was in the ancient city, during the principality of emperor Neva (96-98 CE), that a series of welfare programmes was instituted, and one of them paid special attention to orphans.
At the time, children would receive up to 2.5 assēs (the currency at the time) per diem (per day), so they could feed themselves. Today, the expression has taken a whole different meaning, referring to a fixed rate that is paid by a corporation as a means to compensate employees for their business expenses when travelling. In the UK, they’re called Scale Rate Payments by HMRC (His Majesty Revenue and Customs), the British taxing authority.
Traditional Expense Reporting and Round Sum Allowances
Now that we’ve covered the basics about Per Diem in the UK, how do they actually work? Most companies still use traditional expense reporting for their processes and, in those cases, it’s usually a tiresome experience for employees, and a complex one for employers. Implementing such a system requires a level of supervisory control to verify and approve expenses. On the other hand, the costs of monitoring might well exceed the ones incurred.
Under traditional tracking systems, the employee must remain vigilant in recording any payment or billing that qualifies as a business expense. Such receipts are then typically collected and organised into an expense report, which is then submitted to management. Then, the whole expense management process will begin, and employees can be left waiting to get their reimbursements for weeks. This can lead some organisations to prefer offering advance payments.
However, it’s important to keep in mind that advance payments are not all the same. The ones that are approved by the HMRC are the scale rate payments — the same as Per Diem —, the ones that are not under this badge are called round sum allowances, an amount paid to the employee regardless of how they spend it.
Round sum allowances count as employee earnings, which means that they are subjected to PAYE tax and NIS. On the other hand, amounts paid to an employee for business travel, meals and other associated expenses that qualify as scale rate payments are agreed with HMRC or payments made in accordance with the HMRC benchmark scale rates.
Finance Act 2019
The Finance Act 2019, s 10 includes provisions that have allowed employers, since April 6, 2019, to pay certain subsistence expenses without the need for the employee to provide receipts or bills, provided they use the HMRC benchmark subsistence scale rates — Per Diem rates. This reduces the reporting burden for both employer and employee.
However, a degree of oversight remains. Organisations must institute proper internal controls to ensure that scale rate payments are made only for business-related travel. A business journey only qualifies as such if the employee is sent to perform their professional duties, but it does not include travel to and from home.
However, travelling to a temporary place of work is qualified as business travel. These changes do not apply to organisations that use rates negotiated with HMRC or industry-wide scale rates. For such organisations, a regime for verifying and checking receipts must remain in place
Per Diem in the UK Rates in 2023
Per Diem — or scale rate payments — rates are defined by the HMRC and differ from domestic to overseas trips. The Per Diem rates in the UK, like in most countries around the world, are updated at times.
To help organisations and employees keep track of all these changes, our team of compliance experts created Rydoo’s Compliance Centre, where you can find all the current rates, norms and regulations you need to follow in order for your organisation to stay compliant.
Keep in mind that for travel abroad, HMRC’s Worldwide Subsistence rates will vary according to the city employees are travelling to, not the country. If an employee is travelling to Boston, for instance, the rate for a room is 239$, for Atlanta, the amount lowers to 127$. The updated rates are available on the Government’s website.
How Rydoo can help you manage Per Diem in the UK
Travelling for business and managing expenses can be a hassle. All business travellers want is for their journeys to be a smooth sailing experience, devoid of irritations that often arise from complex procedures and policies. And they do arise, more often than not.
To make this experience as simple as possible for both employees and employers, Rydoo partnered up with Deloitte to incorporate a set of features that can help organisations easily navigate the complexities of Per Diem in the UK. One of the features available is the ability to have benchmarked or their own scale rate payments, which can easily be configured in Rydoo’s expense management app.
All travellers need to do is enter their trip details within the software and all the amounts are automatically calculated based on the current company policy that has been provided by the employer. The traveller can then submit all his eligible /scale rate payments/ for approval with one simple tap.
Rydoo also makes sure everything is in perfect compliance with British law. For example, when a meal has been entered on the same day as a /scale rate payment/, a warning can be shown to users and controllers notifying that the expense is out of policy. This means that all spending is categorised correctly, leaving little room for error or abuse. Rydoo’s platform provides real-time visibility over all spending for the entire company.
You can learn more about how to manage daily allowances on Rydoo’s Per Diem module page. After that, all you need to worry about is getting to the airport on time to catch your next plane. Happy travelling!