Travelling is a necessary business activity, and hence the reasonable costs of such travelling are a tax allowable and deductible expense for your business.

Sole-Traders

A Sole trader may make his own judgment on what is reasonable to claim.

Examples of what is unreasonable have been highlighted by the courts, such as

• Every day subsistence (Food/Meals)
• Travel to a regular location/site e.g. Tuesday clinic, salesman’s patch

HMRC have set fixed rates that may be used for mileage claims, instead of calculating the actual cost per mile of using your own vehicle.

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

Employees

Travel from home to a permanent workplace is not a business trip.  Other trips, made at the request of the employer, are business trips e.g. a sales trip, to a temporary workplace or conference.  A Temporary workplace is one that you are not, and do not expect to be, travelling to, for more than 40% of your time, in any 2 year period.

As soon as the Employee leaves on a business trip, the employer is responsible for the welfare of that employee, until they return.  Hence HMRC have set rules and limits on what an employer can pay to, or for that employee, while on that trip, before welfare turns into a taxable benefit.

What an employer can pay, tax free, is as follows:-

1. Actual travel costs, incurred for that employee e.g fares, tolls, parking, car hire, taxis
2. Reimbursement to the employee for business miles done in the employee’s own vehicle, at the following rates

• Cars – 45p for first 10,000 miles in the tax year, 25p thereafter
• Bicycles – 20p
• Motorbikes – 24p
• Extra per Business Passenger – 5p

3. Reimbursement to the employee for business miles done in a vehicle provided by the employer without fuel, at advisory fuel rates – these change regularly and can be found at https://www.gov.uk/government/publications/advisory-fuel-rates
4. Actual costs of UK accommodation
5. UK subsistence (Food/meals) if more than 5 miles/hours away from base, at either actual costs incurred that day or the appropriate daily allowance as follows:-

• £5 if you are out for over 5 hours, or
• £10 if you are out over 10 hours,
• An additional £10 if either of the above results in you getting home after 8.00pm, or
• £25 if you are out over 15 hours

6. Overseas Accommodation and Subsistence at either actual cost incurred or per worldwide subsistence scale rates supplied by HMRC at gov.uk/government/publications/scale-rate-expenses-payments-employee-travelling-outside-the-uk. These scale rates are set per city or area, may be used per hours in the country and listed elements in the breakdown may be mixed/exchanged with actual costs.
7. Overnight Allowance for Incidental extras of being away – up to £5 per night in the UK and £10 per night overseas– either actual costs up to the allowance or reimbursement to the employee of the allowance in full.  If costs exceed the allowance then the total becomes taxable.  g. Phone call home, forgotten toothbrush, nightcap, morning call, newspaper.

Expenses that are not tax free so best avoided

• Parking penalties or speeding fines.
• Shopping bills (to make your own lunch/dinner etc.).
• Subsistence without valid business travel.
• Costs of extra non business nights/excursions/persons (but you can apportion total bill to just claim business proportion and remember the Company Secretary is a business person too).
• Currency exchanged (costs/expenses incurred or overseas benchmark sums should be claimed instead).