In the UK, employers can reimburse employees for meal and subsistence expenses during business travel using per diems, also called scale rate payments. These are fixed daily amounts that simplify expense reporting and reduce administrative burden as long as certain HMRC (His Majesty's Revenue and Customs) conditions are met.
When using HMRC’s benchmark scale rates or approved bespoke rates, these payments are tax-free and do not need to be reported, provided the employee meets the qualifying criteria. In the UK, per diem expenses are calculated using hourly-based rates.
Specifics
Here are the key rules and conditions you need to follow to ensure per diem payments remain tax-free and compliant with HMRC guidelines in the UK:
Travel must be undertaken as part of the employee’s job responsibilities or to a temporary work location.
The employee must be away from their home or regular workplace for a continuous period of more than 5 or 10 hours.
The employee must have incurred a meal expense after the start of the journey.
Only one form of reimbursement is permitted per meal. For example, if a hotel breakfast is already reimbursed, a per diem for that same meal cannot be claimed.
You can pay less than HMRC’s benchmark rates, but if you pay more, the excess is taxable unless you use approved bespoke rates or follow HMRC’s standard rates.
Since April 2019, HMRC has simplified the rules for reporting business travel expenses. Employers can now claim a fixed daily rate without needing receipts for every individual expense, provided they can demonstrate that the employee incurred some costs during the trip. For example, if an employee has three meals in a day, a single receipt, such as for dinner, can be sufficient.
Domestic trips
The current HMRC benchmark rates for domestic travel in the UK are based on how long the employee is away for qualifying business travel. Different rates apply depending on the duration - one for trips lasting 5 to 10 hours, a higher rate for 10 to 24 hours, and a 24-hour rate.
For example, an employee is traveling from London to Manchester in the UK and has filled in the following trip details:
In the Payhawk template, based on the data entered by the employee, the corresponding columns will be populated in the following way:
Destination. United Kingdom
Destination code. GBR-Manchester
Currency. GBP
5-10 hours. 5
10-24 hours. 10
24 hours or more. 25
Breakfast. Lunch. Dinner. 5. 10. 10.
In this case, the system calculates the rates in the following way:
24 hours or more: 25 GBP will be calculated and included in the per diem expense amount, because this rate is applied if the employee stays in a city 24 hours or more, and in the current example they've spent 24 hours in the destination location, from July 15 08:00 AM until July 16 08:00 AM.
10-24 hours: 10 GBP will be calculated and included in the per diem expense amount, because this rate is applied if the employee stays in a city between 10 hours and 24 hours, and in the current example they've spent 12 hours in the destination location, from July 16 08:00 AM until July 16 08:00 PM.
Breakfast: 5 GBP will be calculated and included in the per diem expense amount.
Lunch: 10 GBP will be calculated and included in the per diem expense amount.
Dinner: 10 GBP will be calculated and included in the per diem expense amount.
Trips abroad
Unlike domestic rates, overseas rates include a 24-hour allowance covering meals, drinks, incidental expenses, and accommodation. Employers can choose to use these rates, reimburse actual expenses, or apply for a bespoke rate.
For example, an employee is traveling from London, the UK to Dublin, Ireland, and has filled in the following trip details:
In the Payhawk template, based on the data entered by the employee, the corresponding columns will be populated in the following way:
Destination. Ireland
Destination code. IRL-Dublin
Currency. EUR
5-10 hours. 38,5
10-24 hours. 94
24 hours or more. 99
Breakfast. Lunch. Dinner. 0. 34. 51,5.
In this case, the system calculates the rates in the following way:
24 hours or more: 99 EUR will be calculated and included in the per diem expense amount, because this rate is applied if the employee stays in a city 24 hours or more, and in the current example they've spent 24 hours in the destination location, from July 17 10:00 AM until July 18 10:00 AM.
10-24 hours: 94 EUR will be calculated and included in the per diem expense amount, because this rate is applied if the employee stays in a city between 10 hours and 24 hours, and in the current example they've spent 11 hours in the destination location, from July 18 10:00 AM until July 18 09:00 PM.
Breakfast: 0 EUR will be calculated for the per diem expense amount.
Lunch: 34 EUR will be calculated and included in the per diem expense amount.
Dinner: 51,5 EUR will be calculated and included in the per diem expense amount.