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Abolition of Receipt Checking for Benchmark Scale Rates

Lady on the phone
The publication of the draft Finance Bill No. 3 on 7 November 2018 has confirmed that from 06 April 2019 there is no requirement for employers to have a full checking system for the amounts spent by employees when using HMRC’s benchmark scale rates to pay or reimburse their employees’ qualifying subsistence expenses.

In addition, HMRC have also introduced a statutory exemption for overseas scale rates with effect from 6 April 2019 and subject to the same checking requirements as benchmark scale rates.

Instead going forward under the amended Section 289A (4A) ITEPA 2003, to make the payments free of tax employers (benchmark rates/ overseas rates) are only required to check that:

  1. the employee claiming has undertaken the qualifying travel in relation to which the amount is paid or reimbursed and
  2. the employer could neither reasonably know nor suspect that the qualifying travel was not undertaken.

Qualifying travel in this context means travel for which a deduction would be allowable under Chapter 2 or 5 of Part 5 ITEPA 2003. If you are already using, or are considering using, the benchmark rates this is undoubtedly good news as it is a more time-efficient and simplified expense checking process.

There are nevertheless practical steps you can take now ahead of the new rules coming into effect from 06 April 2019 such as devising a process for checking that qualifying travel has been undertaken and that the amounts claim are within the benchmark scale rate limits as defined below.

UK Benchmark scale rate payments are the maximum payments or reimbursements employers can pay free of tax to their employees in respect of certain types of subsistence expenses, without prior approval. For instance, meal allowances for employers to pay or reimburse their employees for food and drink costs that would otherwise be tax deductible.

Currently HMRC’s benchmark scale rates are:

 Minimum journey time Maximum amount of meal allowance  
 5 hours  £5
 10 hours £10 
 15 hours and ongoing at 8pm £25* 

*Where a scale rate of £5 or £10 is paid and the qualifying journey in respect of which it is paid lasts beyond 8pm a supplementary rate of £10 can be paid to cover the additional expenses necessarily incurred as a result of working late.

Overseas scale rate payments can be used by employers for paying or reimbursing their employees free of tax and NICs for accommodation and subsistence expenses whose duties requires them to travel aboard for work purposes. HMRC overseas scale rates are set by the country of which the employee is travelling to.

This measure does not change the monetary rates for the benchmark and overseas scale rates at present, but HMRC can change these amounts going forward. However, the measure does mean that employers will no longer be required to check evidence of the amounts by asking for receipts spent by employees when using the benchmark and overseas scale rates from April 2019 but will be required to check that qualifying travel was undertaken.

If you have any questions or would like our assistance in this or any other employment tax area, please do not hesitate to contact us.

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Caroline Harwood
Caroline Harwood
Partner, Head of Share Plans and Employment Tax