If your business requires employees to travel, then you will probably want to cover some, if not all of their expenses - but you’re under no legal requirement to do so.
However, in deciding whether to reimburse employees’ expenses (and if so, how much) there are several critical aspects to take into account:
- The tax and National Insurance (NIC) implications of the expenses.
- The National Minimum Wage implications.
- Your policy.
Confusion often arises as HMRC rules are complex and it’s sometimes unclear what a member of staff can claim for when they’ve returned from a trip.
As such, it’s important to highlight in your employment contracts and company handbook what your policy is on this matter. And our guide explains this in detail for you.
Remember, you can refer to our HR outsourcing services for immediate help with this matter if you want to cut to the chase.
Understanding the basics
The typical business travel expenses include:
- Mileage rates for employees who use their own vehicles.
- Train, bus, taxi and air fares incurred.
- Charges such as parking, motorway tolls and congestion fees.
- Overnight accommodation.
- “Subsistence” costs, such as meals and drinks.
- “Incidental” expenses, such as phone calls and laundry.
There are specific HMRC requirements in respect of each of these expense types. And there are certain business travel expenses you’re exempt from reporting, whereas others will be reportable. For example, there's no requirement to report:
- Works bus service.
- Taxis for irregular late-night shifts (subject to certain conditions).
- Taxis home from work if car sharing arrangements unexpectedly fail.
What to expect from your employees
There is business travel expense etiquette your staff should keep in mind. These are the basic rules that they should follow when they’re abroad.
There’s no exact structure to follow with this process, but you can make it clear to your employees what you expect of their spending when on a trip. This may include:
- Responsible spending: A trip isn’t a chance to splash out on fancy products—if they wouldn’t buy it with their own money, then they shouldn’t buy it with yours!
- Keep all receipts: This is essential as it helps keep all expenditure recorded and you can add up all costs at the end of the trip. This can then correspond with a budget you’ve set and whether there’s over or underspending.
- Respecting your guidelines: Make sure they understand your policies regarding business trips. We cover how to approach creating one further below.
From your side, you can maintain fairness and transparency. Don’t show favouritism between colleagues and be sure to maintain the same budgets for similar trips.
Creating a business travel expenses policy
This document can be a complex and long list of details to cover. You can refer to your HR department for help drafting it, or you can use our 24-hour HR advice line for immediate support.
The scope of your policy should cover how employees spend company money during work-related activities on a business trip. It concerns two key areas:
- Expenses you pay directly on behalf of the employees.
- Any expenses the employee pays that you will reimburse.
Below we condense the scope of a travel expense policy for small businesses down into a set of bullet points. These are the key topics you should cover:
- Defining travel: This generally means any form of transportation and accommodation expenses. Legal documents such as a visa may also be included.
- Medical care fees: Explain your policy regarding compensation and insurance should there be any accidents or illness during the trip.
- Minimising expenses: Explain that overspending is not encouraged and detail your processes on limiting costs through economy class flights etc.
- General expenses allowance for business travel: Cover the basic funds you’ll provide to an employee, along with non-reimbursable expenses (such as lost personal property or upgrades to first class flights etc.).
- Work-related expenses: This can include the likes of a business phone or lifestyle expenses, such as funds for professional dinners with clients.
- Overseas business travel expenses: Explain your approach to expenditure, particularly in the event of travel further afield than Europe.
- Procedure: Detail how your processes work, how employees should claim for expenses incurred. Make clear where your HR/accounts department will arrange the majority of the details - but document any expenses your company hasn’t arranged for.
For calculating costs before or after a trip, you can use a business travel expense calculator to work out your expenses.
Need help with staff expenses?
If your employee has returned from a trip and it’s time to work out who owes what to who, then we can help. Get in touch today: 0800 028 2420.