For many employees, travelling for work offers a welcome break from the daily office routine. However, handling travel expenses can present challenges for employers. While some businesses cover travel expenses to support their employees, others might expect staff to bear the expenses themselves.
To avoid confusion and ensure fairness, we advise having a clear travel expense policy in place. This not only ensures employees know what to expect when travelling for business but also helps maintain morale and financial health.
In this article, we’ll walk you through what travel expenses can be reimbursed and the best practices for managing them effectively.
What are Travel Expenses?
As the term suggests, travel expenses are costs that employees incur while travelling for work. These typically include transportation, accommodation and other subsistence costs such as meals and fuel.
According to HMRC, a “travel for necessary attendance” occurs when an employee travels from a permanent workplace (a place they regularly attend to carry out employment duties) to a temporary workplace (where they perform tasks for a limited duration, such as attending a conference or meeting with a client.) It’s important to note that employees cannot claim tax-free travel expenses for their regular commute from home to their permanent workplace, as this is considered a personal expense.
Types of Travel Expenses
Understanding the various types of travel expenses is essential in creating a clear and comprehensive travel expense policy.
Some of the most common travel expenses include:
Transportation
This covers the cost of public transport (such as trains, buses or flights), taxi fares and car hire. Employees using their own vehicles can claim mileage based on HMRC’s approved rates.
Accommodation
When business travel requires an overnight stay, reasonable accommodation costs can be claimed. Employers usually set guidelines on acceptable rates and standards of accommodation.
Food and Beverages
Meals and subsistence allowances are usually allocated on a per diem basis set by HMRC. These rates are standardised for all UK businesses but can vary depending on the city or country.
How are Travel Expenses Paid?
In the UK, employers are not legally required to cover travel expenses, but it is considered good practice to reimburse any travel costs employees incur during business trips.
Travel expense policies can vary from company to company and are usually outlined in the employment contract. Generally, it is the employer’s responsibility to ensure employees are not left out of pocket for expenses incurred while travelling for work. Travel expenses are typically covered by providing an allowance, issuing a credit card or reimbursing employees through a travel expense claim.
Are Travel Expenses Exempt from Tax?
According to HMRC, the following expenses are exempt from tax and National Insurance costs, including:
- Public transport costs
- Hotel accommodation if you have to stay overnight
- Food and drink
- Congestion charges and tolls
- Parking fees
- Business phone calls and printing costs
Travel expenses are either reimbursed by the employer or claimed directly from HMRC by the employee. In either case, receipts of travel costs must be provided to claim tax relief.
Can Remote Employees Claim Travel Expenses?
Since the COVID-19 pandemic, remote working has become increasingly common. In 2023, it was reported that around 40% of adults worked from home at some point during their week (either hybrid or entirely remotely) compared to just 12% in 2019.
With the rise in remote and hybrid working, you might be feeling confused about what constitutes a permanent workplace and what’s considered essential business travel. While some employees work entirely remotely, others split their time between home and the office. This can be challenging for employers to navigate.
An employee’s permanent workplace is where they spend most of their time. Travel between an employee’s home and their permanent workplace (i.e., their office) is considered regular commuting and is a personal expense. However, employees who work remotely can claim travel expenses when required to travel to a temporary workplace for business purposes, just as office-based employees can.
Advantages and Considerations for Employers
There are several benefits to covering travel expenses, including:
- Employee Satisfaction: Employees will be more satisfied when their travel expenses are covered. This reduces financial stress and improves morale, which can lead to higher employee retention.
- Tax Relief: When handled correctly, reimbursing travel expenses can reduce the overall tax burden for both employees and the business.
- Company Reputation: A comprehensive travel expense policy can enhance your company’s reputation as a fair and supportive employer, which can be attractive to potential hires and clients.
However, there are also important considerations:
- Cost: Covering travel expenses can be costly, so it’s important to manage these expenses carefully.
- Administrative Burden: Managing travel expense claims can be time-consuming and may require efficient systems to avoid delays or errors.
Creating a Travel Expense Policy
Having a clear policy on expense procedures relating to work travel is essential. Here’s our advice on creating an effective policy:
- Outline Covered Expenses: Clearly outlining what expenses can be reimbursed is essential in creating a good travel expense policy. Typical expenses include transportation, accommodation, meal allowances and other subsistence such as parking fees and phone bills.
- Set Limits: Establishing reasonable spending limits on certain expenses helps employees effectively manage their costs and prevent issues later on.
- Clarify Documentation Requirements: Clarifying what documentation is required to reimburse expenses can help speed the process along. Ensure that employees keep a record of boarding passes, travel tickets, receipts, invoices and mileage logs.
- Check HMRC Guidelines: Ensuring that your travel expense policy complies with HMRC guidelines is essential to avoid any tax or NIC implications.
- Review Regularly: Regularly reviewing your travel expense policy ensures it remains relevant and aligned with current business needs, employee expectations and legal requirements.
By creating a robust travel expense policy, you can ensure that travel costs are managed effectively, employees are treated fairly and nobody incurs unnecessary costs.
How The HR Department Can Help
With expertise in policy development, HR consultancy and compliance, our team of experts is equipped to advise you on the best practices for creating a travel expense policy.
Get in touch with us today to help your business establish and manage travel expenses in a way that complies with UK regulations, supports your company’s financial health and enhances employee satisfaction.
