Travelling abroad for work often presents more challenges than business travel within the UK, but expenses shouldn’t be one of them. As a general rule, employees can claim for transport, subsistence and accommodation overseas just as they would at home, as long as they keep in mind HMRC’s ‘all or nothing rule’: to claim tax relief on business expenses they “must be incurred wholly, exclusively and necessarily in the performance of your duties”. Here’s what staff need to be wary of when travelling for work in and outside of the UK.
Encourage staff to hold on to receipts at home and abroad – not only will they demonstrate the amount that’s been paid, they can be used as evidence should you need to prove foreign travel expenses to HMRC.
If staff lose their receipts, you can refer to HMRC’s comprehensive list of benchmark scales for accommodation and subsistence payments. These aren’t allowances – you can only claim the amount prescribed by HMRC if you actually incur expenses up to that amount (HMRC rates are typically more generous than the amount you’d usually spend).
Rates are quoted in the currency of the country you visit and include figures for a room rate per night and a ‘total residual rate’ which covers the cost of meals and travel within a 24-hour period. There are also options shorter trips.
Be careful mixing business and leisure
HMRC does not look kindly upon expenses with ‘duality of purpose’ – claims can only be made for business activities, and not for anything that results in personal benefit. So, if employees extend their trip for leisure purposes or take a spouse with them, they can’t claim these as business expenses. It’s not impossible to enjoy some leisure time while travelling for business but there has to be a clear distinction between work and play where expenses are concerned.
Incidental overnight expenses
If your company offers employees an Incidental Overnight Expenses payment, this is tax-free. Examples of incidental expenses are personal costs such as buying newspapers, paying for laundry or phoning home. The current rates are set at £5 for overnight travel within the UK and £10 per night for travel overseas.
Exchange rates can make claiming expenses tricky. For example, a taxi journey at €30 could actually cost £25, but come to £26 when it leaves your bank account. HMRC recommends using the amount that left your bank account. To avoid employees being faced with exchange rate surprises, consider using prepaid expense cards. You can top-up the cards when staff need the money, so staff aren’t left out of pocket and there won’t be any difficulty in converting at the right exchange rate.
SMEs can take advantage of lower prices abroad to purchase assets for business (such as cameras or computers), providing they pay the right taxes. Many countries let travellers reclaim sales tax, either at the airport when you leave or at shopping centres where they often have tax reclaim counters. The purchase will need to be decalred on return to the UK and any applicable VAT must be paid, but if you’re VAT registered then you reclaim the cost on your next tax return.
Remember that planning ahead with how expenses will be managed and recorded, and how you will buy currency is an important part of being ready for every trip. Follow our tips for managing your business travel expenses and every trip is sure to be a success.
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