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HMRC agreed in January 2008 that employers may use the benchmark rates published by the Foreign and Commonwealth Office (FCO) when paying accommodation and subsistence expenses to employees whose duties require them to travel abroad, without the need for the employees to produce expenses receipts.
However, the FCO has stopped producing worldwide subsistence rates tables because it no longer uses these rates for its own staff.
The Revenue is therefore reviewing the policy of providing benchmark rates for overseas subsistence. The department will make a further announcement as soon as a decision is made.
In the meantime, employers can continue to use the rates in the current version on its website until the end of the 2010/11 tax year.
Accommodation and subsistence payments at or below the published rates are not be liable for income tax or National Insurance for employees who travel abroad, and do not need to be included on forms P11D.
Employees are not automatically entitled to tax relief for the shortfall if their employer pays less than the published rate.
They can only obtain relief under the employee travel rules for their actual, vouched expenses, less any amounts paid by their employer.
These tax-free amounts are in addition to the incidental overnight expenses that employers may reimburse tax-free under ITEPA 2003, s 240 and the corresponding National Insurance disregard.
Employers are not obliged to use the published rates. It is always open to an employer to reimburse their employees' actual, vouched expenses, or to negotiate a scale rate amount which they believe more accurately reflects their employees' spending patterns.
Employers wishing to negotiate such an amount must be able provide the taxman with evidence to support their figures.
See here for more details.
