Travel and Subsistence Expenses: Understanding Per Diem Allowance

This article explains how HMRC treats travel and subsistence expenses in the UK, with a focus on per diem allowances, qualifying conditions, and record-keeping rules. It covers which costs count as subsistence, how benchmark and bespoke scale rates work, and when reimbursements remain tax-free. The guide also looks at different working patterns, such as home-based staff, multi-site roles, and long-term postings, alongside UK and overseas rates. Practical guidance on claiming, documentation, and common exceptions helps employers and employees apply the rules correctly and avoid compliance issues.

Managing business expenses isn’t always straightforward, especially when employees travel for work. There’s often confusion about what costs can be claimed, how to report them, and what tax rules apply. One key area is subsistence allowances – money set aside for meals, accommodation, and other necessary expenses during work trips. Knowing how these allowances work helps companies stay compliant while making life easier for employees on the road. Let’s break it down, so you can handle travel expenditures with confidence.

What are subsistence expenses?

Subsistence expenses are the costs of meals, drinks, and accommodation that employees incur when travelling for work away from their normal workplace.

These expenses usually arise when personnel must stay overnight or work late away from their usual location. HM Revenue and Customs (HMRC) recognizes them as legitimate business expenses when they meet specific criteria.

They represent additional spending beyond what employees would normally encounter during their regular workday, such as hotel breakfasts, restaurant lunches near client offices, or dinners when working late. Overnight accommodation is another significant category, including room rates and reasonable additional charges.

To qualify for tax relief, subsistence expenses must be “wholly, exclusively and necessarily” incurred for work duties, meaning the employee had no choice but to incur these costs while performing their job.

Which expenses qualify for a subsistence allowance?

• Meals during business travel.Food and drink costs qualify when they are an extra expense caused by business travel. Examples include hotel breakfasts during overnight stays or meals bought while visiting clients or attending off-site meetings. Regular meals taken at or near the normal workplace do not qualify.
• Accommodation for overnight stays.Hotel stays or other lodging qualify when an overnight stay is required for business reasons. The stay must be necessary to perform work duties, not chosen purely for personal comfort or convenience.
• Work-related phone calls and internet use.Charges for business phone calls or internet access needed to carry out work while travelling can qualify. These costs are often treated separately from subsistence but are still valid business travel expenses.
• Related travel costs (not part of daily allowances).Expenses such as train tickets, taxi fares, mileage, or fuel are connected to business travel but are not included in subsistence allowances. They are claimed under travel expenses rather than daily meal or lodging allowances.

Further Reading: Wallester for Business Travel: Transform Expense Management With Virtual Cards

How do HMRC subsistence rates work?

HMRC subsistence rates provide a simplified reimbursement method without requiring detailed receipts for every meal. These benchmark scale rate payments allow standardized reimbursement without triggering tax or National Insurance liabilities.

The rates vary depending on the time spent away from the normal workplace and whether the journey involves an overnight stay. There are specific rates for breakfast (for early departures), late evening meals, and different rates for overnight accommodation in various locations.

Business trips

Business trips form the core scenario for subsistence claims. These journeys must be to temporary workplaces for business purposes rather than personal reasons.

For a trip to qualify:

• It must involve travel to a temporary rather than regular workplace
• The journey must be necessary for work duties
• The travel must be temporary (generally less than 24 months to the same location)
• There must be a clear business purpose (client meetings, training courses, conferences, etc.)

Business trips may involve domestic or international travel, with different subsistence rates applying based on the destination.

Private trips

Private trips generally don’t qualify for subsistence allowances. When an employee combines business and private travel, only expenditures directly related to the business portion qualify. Companies must carefully separate these elements to maintain compliance.

Regular commuting between home and a permanent workplace doesn’t qualify for subsistence allowances. However, if an employee must travel to a temporary workplace, the journey may qualify even if it begins from home.

Meals, beverages and tips

Meal expenses form a substantial portion of subsistence claims and qualify under specific conditions:

• Breakfast costs qualify when an employee must leave home earlier than normal (before 6:00 AM) for business travel.
• Lunch expenses while away from the normal workplace qualify, though HMRC expects the allowance to cover only additional costs compared to typical workday lunch.
• Evening meals qualify when business necessitates working late (until at least 8:00 PM) away from home.
• Reasonable tips at restaurants in countries where tipping is customary can be included in claims.

Accommodation

Hotel accommodation represents one of the largest components of subsistence allowances. Overnight stays must be necessary for business purposes to qualify, typically when:

• Work activities span multiple days at a distant location
• Early morning or late evening commitments make daily travel impractical

The standard of accommodation should be reasonable and appropriate for the business context. Additional charges like internet access needed for work or laundry services during extended stays may also qualify, while optional extras generally don’t.

For longer assignments, serviced apartments or short-term rentals often provide better value than hotels.

Charges for incidental expenses

Incidental outlays cover small personal costs employees might have while traveling for work. HMRC allows a flat rate of £5 per night for UK stays and £10 per night for overseas trips to cover things like:

• Laundry services during longer trips
• Newspapers or small personal items
• Phone calls home
• Tips for hotel staff

These allowances do not cover business-related costs like parking charges, congestion charges, or currency exchange.

Q&A: Do employees need to spend the full allowance amount to receive a subsistence rate payment?

No. When benchmark scale rates are used, employees do not have to match the allowance exactly to their actual spending. The key requirement is that a qualifying expense was genuinely incurred during business travel and that the journey itself meets HMRC’s conditions.

What are exemptions?

HMRC offers several exemptions that simplify the tax treatment of subsistence payments, making sure businesses and employees don’t face unnecessary tax or National Insurance charges on legitimate costs. These exemptions allow companies to reimburse employees without additional tax implications, provided they follow the rules.

• Exact reimbursement exemption. If an employer reimburses an employee for actual traveling subsistence costs (such as hotel bills or meal receipts), these payments are not subject to tax or NI, as long as they meet HMRC’s qualifying conditions.
• Benchmark scale rates. Instead of requiring receipts for every meal, employers can use HMRC’s standard scale rates to provide tax-free allowances for meals and incidental expenses. These rates simplify claims while keeping reimbursements tax-exempt.
• Bespoke scale rates. Businesses can negotiate custom reimbursement rates with HMRC based on real-world expense data. To use these, companies must conduct a representative sampling of employee expenses and get HMRC approval.
• Overseas scale rates. When employees travel abroad, HMRC recognizes that costs vary by country. Overseas scale rates provide country-specific allowances, reflecting local prices for accommodation, meals, and other expenditures.

Further Reading: The Complete Guide to Virtual Cards for Business

How to qualify for a business travel allowance?

To claim a business travel allowance, specific conditions must be met. These rules help distinguish legitimate work-related expenses from personal travel costs:

• Work-related purpose. The trip must be directly connected to job duties, such as attending meetings, conferences, client visits, or on-site work at a temporary location. Journeys made for personal reasons or regular commuting to a permanent workplace do not qualify.
• Temporary workplace rule. The destination must be a temporary workplace rather than a fixed job location. HMRC generally defines a workplace as temporary if an employee spends less than 40% of their working time there over a period of no more than 24 months. If a posting extends beyond this timeframe, the location may be considered permanent, affecting tax treatment.
• Additional expenditure requirement. Allowances must involve extra costs that would not normally be incurred. This includes costs on meals, lodging, and necessary travel expenses beyond what the employee would typically spend if working at their usual location.
• Detailed documentation. Employers and employees must keep clear records of travel-related costs, including receipts, dates, locations, and the purpose of the trip. Even when using HMRC’s scale rates, proof that the journey took place is still required.
• Exceptions for home-based workers. Employees with a home office as their designated workplace may qualify for travel allowances when visiting company offices or client sites, depending on the nature of their contract and working arrangements.

Regular travel between home and a permanent workplace is not eligible for relief, even if the employee occasionally works remotely. Employers should review working patterns carefully to avoid misclassification. By meeting these conditions, employees and companies can correctly apply for tax-free travel allowances while staying compliant with HMRC rules.

Q&A: Can a journey still qualify if an employee visits more than one location in a single day?

Yes. If each location is visited for a genuine business reason and none of them counts as a permanent workplace, the travel can still qualify. The key factor is that the journeys are required for work duties and meet HMRC’s temporary workplace conditions.

Staff working from home

For employees with an established home office as their permanent workplace, travel to company premises may qualify as business travel rather than commuting. This affects what journeys qualify for subsistence allowances.

The classification depends on whether home working is a formal arrangement or occasional flexibility. When home-based employees travel to other locations for business, the usual qualifying principles apply.

Staff working on multiple sites

Employees who work at multiple sites on a regular basis present special considerations:

• For staff with no single fixed workplace who travel to different locations, each journey typically qualifies as business travel.
• When employees split their time between different company locations regularly, travel between these locations may qualify as business travel.
• The 40% rule is an important note: if an employee spends more than 40% of their working time at a particular location, HMRC generally considers it a permanent workplace.

Companies should document working patterns to support subsistence claims.

Staff travelling as part of the job

For employees whose job inherently involves travel (sales representatives, service engineers, delivery drivers), most journeys qualify as business travel. These staff can typically claim subsistence outlays for meals and accommodation necessitated by their work.

When travel is integral to the job, the employee’s home often serves as their base of operations for tax purposes, meaning journeys from home to client locations qualify as business travel.

Documentation is particularly important for staff who travel extensively, including records of business purpose, client meetings, and service calls.

Staff on longer-term postings to other sites

Longer-term assignments create complex situations for daily allowances:

• For assignments expected to last less than 24 months, journeys typically qualify as business travel.
• If an assignment initially expected to last less than 24 months is extended beyond this period, the tax treatment changes once it becomes known the assignment will exceed 24 months.
• International assignments often involve special tax rules that vary by country.

The “temporary workplace” rule applies based on expectations at the time of travel. If an assignment unexpectedly extends beyond 24 months, relief remains available for the initial period.

Subsistence rates per country

Subsistence rates vary significantly between countries, reflecting different costs worldwide.

Subsistence expenses in UK

HMRC’s benchmark scale rates for UK travel are:

• Breakfast allowance: Up to £6.00. Eligible if the employee leaves home before 6:00 AM and buys breakfast away from home or the workplace.
• One meal allowance (5 hours): Up to £5.00.Applicable if the employee is away from their normal place of work for at least 5 hours and incurs the cost of a meal.
• Two meal allowance (10 hours): Up to £10.00. Applies when the employee is away for at least 10 hours and buys two meals (e.g., lunch and dinner).
• Late evening meal allowance: Up to £10.00. Available if the employee is required to work after 8:00 PM and buys a meal as a result.
• UK overnight stay: Up to £5.00. Applies when the employee is required to stay overnight for business purposes within the UK.

Further Reading: Top Expense Policy Mistakes in Transport Companies and How to Fix Them

Subsistence allowance in the EU

EU countries have varying subsistence costs reflected in HMRC’s worldwide rates. Northern European countries generally have higher rates than Southern or Eastern European nations.

The rates include separate allowances for accommodation and meals, allowing appropriate reimbursement when different arrangements are made.

Subsistence allowance in Asia

Asian countries present wide variations in subsistence costs. Major business centers like Tokyo, Singapore, and Hong Kong have some of the highest rates globally, while developing economies typically have lower approved rates.

Cultural differences in meal patterns and dramatic variations in accommodation costs affect daily allowances across Asia.

Subsistence expenses in the USA

HMRC recognizes the US General Services Administration (GSA) per diem system for UK staff traveling to America. The US system separates lodging allowances from meal and incidental expense (M&IE) allowances.

Major US cities have substantially higher rates than smaller cities or rural areas. US tipping customs (15-20% in restaurants) significantly affect subsistence expenditures for UK staff.

Claiming your HMRC subsistence allowance

Claiming subsistence allowances requires following specific procedures:

• Employees submit expense claims with details of business travel and expenses incurred.
• For actual cost reimbursement, receipts should accompany claims.
• Organizations should establish clear policies regarding qualifying expenditures, documentation requirements, and limits.
• When using scale rates, evidence of the official business journey is still required, though detailed receipts for meals may not be necessary.
• Claims should ideally be processed within the tax year they were incurred.

How to make a qualifying subsistence expenses payment

Companies have several options for reimbursing subsistence costs:

• Actual cost reimbursement. The most straightforward approach, where employees submit receipts and receive exact amounts.
• Benchmark scale rates. Using HMRC’s standard rates for administrative convenience
• Bespoke scale rates. Custom rates approved by HMRC based on sampling of actual costs
• Worldwide subsistence rates. For international travel, using country-specific approved rates

Scale rate payments

Employees must still incur a real subsistence cost for a scale rate payment to apply, even though individual meal receipts are not required. Employers need to confirm that qualifying travel took place and that food or incidental expenses were genuinely paid. Scale rates simplify administration, but in higher-cost locations they may cover only part of the actual spend, meaning companies sometimes combine them with actual cost reimbursement for accommodation.

Are you required to keep records?

Record-keeping requirements depend on the reimbursement method:

• For actual cost reimbursement, companies should keep all receipts.
• For scale rate payments, evidence of qualifying travel is required, though not detailed receipts for every meal.
• Employees should keep copies of expense claims and supporting documentation.
• Records should be kept for at least six years after the tax year end.
• Digital record-keeping systems can streamline these processes.

Be on top of your travel and subsistence expenses with Wallester

Keeping track of employees’ travel costs can be a headache, but Wallester makes the process simple. With smart expense management tools, companies can stay on top of spending, cut down on paperwork, and avoid compliance issues.

• Corporate cards for easy payments

Wallester’s virtual and physical corporate cards allow employees to cover meals, accommodation, and public transport directly – no need to use personal money or wait for reimbursements. Cards can be issued instantly, and spending limits can be adjusted in real-time to match company policies. This guarantees employees have the funds they need while keeping expenses under control.

• Instant expense tracking

Every transaction made with a Wallester card is recorded in real time, so there’s no risk of missing outlays or going over budget. Employees can snap a photo of their receipts and upload them through the app, eliminating the hassle of collecting and sorting paper receipts later.

• Clear, customizable spending reports

Keeping an eye on travel costs is easier with detailed reports that break down spending by category, employee, or trip. Finance teams can spot unusual expenditures, track trends over time, and adjust travel policies based on real data. This level of visibility helps businesses make smarter financial decisions.

• Built-in compliance monitoring

Wallester helps companies stay within tax rules and internal policies by flagging transactions that don’t meet guidelines. This prevents employees from overspending or making claims that don’t qualify, reducing the risk of tax penalties or budget overruns.

• Receipt reminders to keep records in order

It’s easy to forget to submit receipts, but Wallester’s automated reminders help employees stay on top of their paperwork. These gentle nudges reduce missing receipts, making expense audits smoother and saving finance teams time chasing down missing information.

With Wallester, travel and subsistence costs become easier to manage, more transparent, and less of a burden for both employees and finance teams.