Daily Allowance (Per diem)
If you provide exempt scale rate payments to your employees for their subsistence expenses, you do not need to report these per diems to the HMRC or pay taxes on them.
Exempt scale rates must only be used where all the qualifying conditions are met.
- 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
- An employee can only be reimbursed for a meal once. Therefore if the cost of an evening meal or breakfast is reimbursed on an actual basis because it is included in the cost of an overnight stay, the employee would not be entitled to the benchmark rate for breakfast or late evening meal as well.
To recap, exempt scale rate payments are approved bespoke amounts agreed with the HMRC, or payments that are made in accordance with HMRC’s benchmark scale rates. We’ll be discussing the latter below.
The current benchmark rates for domestic travel in the UK are:
|a)||£5||Qualifying travel of 5 hours or more|
|b)||£10||Qualifying travel of 10 hours or more|
|c)||£25||Qualifying travel of 15 hours (and ongoing at 8 pm)|
Notes on Domestic Per Diems:
- An additional meal allowance of up to £10 per day may be paid if an allowance under a) or b) is paid and travel is ongoing at 8 pm.
- No benchmark rate has been set for overnight accommodation
- The over 15-hour rate will almost always apply when an employee is required to stay overnight and provided that the cost of any meal is not included as part of the accommodation
Overseas Scale Rates
For travel abroad, HMRC’s Worldwide Subsistence rates will apply per city: https://www.gov.uk/guidance/expenses-rates-for-employees-travelling-outside-the-uk
If your employee is travelling to a place not shown in the table, you can reimburse your employees using the rates for the closest city shown for the country that they have travelled to.
Unlike domestic rates, overseas scale rates also include:
- a 24-hour rate, comprising of breakfast, lunch, dinner, other, drinks, and hotel to office allocations
- a supplement room rate for overnight stays
Here’s an example of the scale rate for a business trip to Abu Dhabi:
|Abu Dhabi, UAE||Rate (in dirham)|
|Over 5 hours||98|
|Over 10 hours||242.50|
|24-hour rate||373.50 (total residual) + 637 (room rate)|
|Hotel to Office||30.50|