Here is what all employers should know about employee expenses!
We are going to talk about a few of the more common employee expenses that explain what can be claimed and what need to be kept:
- Travel from an employees home address to their normal place of work is classed as private travel. There are some exceptions but generally is cannot be claimed for mileage.
- The Mileage allowance currently allowed by HMRC is 45p per mile for the first 10,000 miles, and 25p thereafter for cars and vans (there are different rates for motorcycles and bikes).
- The mileage allowance covers the running and maintaining of the employees vehicle i.e. fuel, insurance, maintenance and wear and tear of the vehicle.
- VAT can be claimed on the fuel portion of this payment, based on the Fuel advisory rate limit.
- As an employer you do not have to reimburse the full 45p to your employees.
- If you choose to pay in excess of the 45p per mile then the excess amount will need to be included on the monthly payroll for NI purposes, and also is classed as a benefit in kind and needs to be reported on a P11d.
- In order to claim mileage the employee should keep a log of their business mileage, and provide it to the employer.
- Employees should also provide receipts for the petrol as evidence, (and also to claim the VAT back on the petrol element.)
If you have employees working at a temporary workplace the following costs are allowable:
- Overnight accommodation – hotel, B&B etc (provided the accommodation is attributable to the travel for work)
- Parking at the accommodation
- Mileage from the hotel to the temporary place of work
- Tolls or congestion charges to get to the place of work
- Business Phone calls
- Meals whilst away – breakfast, lunch and dinner
Employees can also be paid for incidental overnight expenses of up for £5 per night (£10 for stays outside the UK). If a payment is made that exceeds this limit, the whole of the payment becomes taxable.
Things not allowable
- Meals made at home and then taken to the temporary work place
- Putting pets in kennels whilst away from home
- Parking fines, speeding tickets
Again, the employees should keep receipts of all of the expenses incurred for them to be reimbursed.
Generally clothing isn’t an allowable expense as it is not “wholly and exclusively” for the purpose of the trade, however there are certain instances where it’s allowed:
- Protective clothing that employees wear in order to do their job, for example for work such as helmets, safety boots, overalls, high-vis vests etc
- Uniforms – i.e nurses or beauticians tunic that are only worn at work.
Working from home
Employees can be reimbursed for reasonable additional costs that are incurred working from home. These include
- Additional costs of heating and lighting
- Metered cost of increased water use
- Charges for internet access
- Home contents insurance
- Business telephone calls
It can sometimes be difficult to calculate the increase in costs due to working from home therefore there is a standard amount of £4 per week that can be paid without need for evidence. Payments over this amount will need evidence to justify them i.e. invoices and receipts.
Every business wants to keep good relationships with customers and clients, and one way of doing this is what we accountants call “Entertaining”. This includes eating, drinking and other hospitality.
Ordinarily expenditure on business entertainment or gifts is not allowable for a deduction against profits, however all receipts should be retained as there may be some items that are allowable.
Obviously these are only a few of the areas where expenses can be claimed. If you need more information please contact us.