HM Revenue and Customs Brief 24/09
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Issued 2 April 2009
Benchmark scale rates for day subsistence
HM Revenue & Customs (HMRC) has introduced an advisory
system of benchmark scale rates which employers can use to make
subsistence payments to employees who incur allowable business travel
expenses free of tax and National Insurance contributions (NICs). The
new advisory system will be implemented from 6 April 2009.
The advisory system only covers benchmark scale rates for day
subsistence payments. If an employer wishes to pay subsistence to
employees who have to stay overnight they can either reimburse the
actual cost incurred by the employee or agree a tailored scale rate to
cover meals and other expenses in a dispensation with HMRC.
This brief sets out the framework for the system.
Under the current rules an employer is required to notify HMRC
of all expenses paid to an employee, even where those expenses would be
allowable, unless they have a dispensation. A dispensation is an
agreement between HMRC and an employer which allows the employer to pay
an agreed rate for allowable expenses without the need to report the
expenses to HMRC. An employer may apply for a dispensation by
submitting a completed form P11DX. As part of this process, where
business travel expenses are paid, the employer often agrees scale
rates for travel and subsistence expenses with HMRC that broadly match
the allowable expenditure incurred by its employees on business travel.
HMRC currently expects employers to conduct a sampling
exercise before it will agree to a particular rate being included
within a dispensation. The aim of the exercise is to identify a
reasonable level of allowable expenditure that reflects the most common
level of spending.
HMRC recognises that a sampling exercise can be burdensome and
expensive for employers. It has therefore introduced an advisory system
of benchmark scale rates for day subsistence payments that an employer
can use without having to carry out a sampling exercise.
As part of this new approach, in response to concerns from
some employers and professional advisers about consistency between what
is agreed for different employers, HMRC also proposes to standardise
the different scale rates that it will agree with employers.
Under the benchmark system, HMRC has set advisory scale rates
for particular day subsistence expenses that it will accept for all
employers. As long as the employee has incurred subsistence expenses
while travelling on an allowable business journey, employers will be
able to make tax and NICs free subsistence payments up to the advisory
rates without agreeing them with HMRC. Employers wishing to use the
benchmark scale rates for subsistence payments will simply need to
notify HMRC of their intention by ticking the appropriate statement/box
on form P11DX before starting to use the system. The rates that can be
used will be:
Breakfast rate (irregular early starters only) - A rate of up
to £5.00 may be paid where a worker leaves home earlier than usual and
before 6.00 am and incurs a cost on breakfast taken away from his home.
If the employee regularly leaves home before 6.00 am because, for
example, he works an early shift he would not be entitled to use the
breakfast benchmark scale rate.
One meal rate (Five hour rate) - A rate of up to £5.00 may be
paid where the worker has been away from his home/normal place of work
for a period of at least five hours and has incurred a cost on a meal.
Two meal rate (Ten hour rate) - A rate of up to £10.00 may be
paid where the worker has been away from his home/normal place of work
for a period of at least ten hours and has incurred a cost on a meal or
Late evening meal rate (irregular late finishers only) - A
rate of up to £15.00 may be paid where the employee has to work later
than usual, finishes work after 8.00 pm having worked his normal day
and has to buy a meal which he would usually have at home.
If the employee is paid an allowance under the five or ten
hour rule, the late meal allowance could still be paid if he finishes
work after 8.00 pm and buys a meal that he would usually have at home.
However, if the employee regularly finishes work late because, for
example, he normally works the afternoon or evening shift, he would not
be entitled to use the late evening meal rate.
Particular issues and exemptions
Payments in excess of the benchmark rates
The benchmark rates are the maximum tax and NICs free amounts that
could be paid by employers who choose to use this system. An employer
could pay less than this rate if it wants to do so. If a higher amount
is paid without agreeing a tailored scale rate with HMRC, the excess
should be subject to tax and NICs.
Benchmark scale rates must only be used where all the
qualifying conditions are met. The qualifying conditions are:
• 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 his normal place of work or home
for a continuous period in excess of five hours or ten hours
• the employee should have incurred a cost on a meal (food and drink)
after starting the journey
Early starter and late finisher rates
The early starter and late finisher rates are for use in exceptional
circumstances only and not intended for employees with regular early or
late work patterns.
Tax and NICs free scale rate payments must be limited to three
meal rates in one day (or 24 hour period). A meal is defined as a
combination of food and drink.
Where employees are required to start early or finish late on
a regular basis, the over five hours or over ten hours rates could be
paid provided all the other qualifying rules are satisfied.
Working Rule Agreements
Benchmark scale rates would not apply to employees covered by
Working Rule Agreements, for which separate specific rates are already
set for particular occupations.
Friends and Family Allowance
Some existing dispensations also include a tax free scale
rate for staying with family and friends when employees are required to
stay overnight on business. HMRC has reviewed this policy and concluded
that there is no legal basis for giving tax relief because it is not
linked to any specific underlying expense. Therefore, a scale rate for
staying with family and friends will not be included within the
advisory system or given in any new dispensations. All agreed tax and
NICs free scale rates in existing dispensations covering such an
allowance will be withdrawn when the dispensation comes up for review.
Questions and answers
What you have to do if you want to pay scale rates to your
You should apply to HMRC for a dispensation. You need to
complete a form P11DX, which is the form used by employers to apply for
a dispensation, and submit it to HMRC. On the form you need to indicate
with a tick against the appropriate statement under 'Travel and
Subsistence' that you intend using HMRC’s benchmark scale rates to
reimburse your employees’ subsistence payments. By ticking this box you
would be merely notifying HMRC that you intend paying HMRC’s benchmark
scale rates for day subsistence and that you have adequate management
processes in place to ensure that payments are only made where all the
qualifying conditions are met. If you want to apply to include other
items of allowable expenditure in a dispensation for example fees and
subscriptions, laundry, telephone charges, etc, you need to tick the
appropriate boxes and supply the requested information on the form.
When can you pay a scale rate?
Scale rate payments may be made to employees who necessarily
travel in the performance of their duties or have to travel to a
temporary place of work. The statutory rules are in Section 336 to 342
of Income Tax (Earnings and Pensions) Act 2003. Where the employer
agrees a scale rate in a dispensation, the scale rate may also be taken
into account for NIC purposes.
Guidance on how the employment income travel expense rules
work can be found in HMRC’s Booklet 490 Employee
travel – A tax and NICs guide for employers (PDF 184K). This
booklet will be updated shortly to reflect the new scale rates system
available to employers from April 2009.
When must you not pay tax and NICs free scale rates?
Tax and NICs free scale rates must not be paid where the
employee is not travelling on a qualifying business journey. For
example, when on a journey that involves ordinary commuting (or similar
to ordinary commuting), or private travel.
Additionally, no tax and NICs free payment should be made if
an employee does not incur an expense on meals after leaving home or
his normal place of work, even if the journey was a qualifying business
journey. This means that employees who do not buy a meal or who take a
packed lunch from home are not entitled to a tax and NICs free payment.
Do employers have to use the benchmark scale rates?
Employers do not have to use the benchmark rates. They can
reimburse their employees’ actual expenditure or apply to HMRC to agree
a scale rate appropriate for their business needs in a dispensation.
However, where an employer wants to use a higher scale rate, it will
have to undertake a sampling exercise to show the higher rates are in
line with what its employees’ typically spend on subsistence and agree
the rate with HMRC.
What records would an employer need to keep?
An employer will need to keep sufficient records to be able
to demonstrate that the employee was entitled to the payment. An
employer also needs to be able to demonstrate that routine checks are
undertaken to ensure that the travel expenses rules are being followed.
What happens to existing dispensations?
Existing dispensations will remain in force until they come
up for review in accordance with HMRC’s rolling review programme,
usually on a five year cycle. When the existing dispensation comes up
for review the employer can choose to switch to benchmark scale rates
or apply to continue to use a tailored rate. Where a new dispensation
is requested the employer will have to go through the process of
undertaking a statistically valid sampling exercise.
Uprating benchmark scale rates
HMRC will review the rates annually and consider revising
them when there has been a change in the scale rate of plus or minus 10
per cent based on the Consumer Price Index from when it was last
How has HMRC arrived at the benchmark scale rates in question?
HMRC reviewed the scale rates agreed for a number of
employers, both large and small, and based the rates on the most
commonly agreed rates.
Why not have higher benchmark rates for London or other
locations where prices are more expensive?
The benchmark rates are linked to what employers typically reimburse
their employees and it would not be possible to break this down between
different locations. Personal expenditure on subsistence varies
significantly between employees even when working at the same location.
If an employer typically reimburses more than the benchmark
rates then it will remain open to them to agree a higher rate with HMRC
or to reimburse actual expenditure.
About the Author
© Crown Copyright 2009.
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Article Published/Sorted/Amended on Scopulus 2009-04-04 12:05:44 in Tax Articles