Business trips are exciting for many reasons. New places, thrilling business opportunities and employee bonding are among few. However, people prefer to avoid dealing with the aftermath – expense claims. Luckily, you can reimburse travel expenses using different methods, like per diem rates.
The beauty of per diems lies in their simplicity and efficiency. By knowing the fixed rates and adhering to them, companies can minimize paperwork, speed up reimbursements, and maintain standardized rates. It’s a method that facilitates smoother business travel, with clear metrics laid out in advance.
But how do HMRC scale rate payments work, especially when it comes to meal allowances? In the following blog, we’ll provide UK per diem rates for 2024, explain how to pre-calculate meal allowances, and explore the criteria for tax relief eligibility.
What are per diems?
Before we dive deeper into HMRC per diem rates, it’s good to start with the basics. First and foremost, what are per diems? Per diem, direct translation ‘for each day’, or scale rate payment, is a term within the financial sector that designates a fixed daily rate for business travel expenses.
Opting for per diems instead of actual expenses can simplify the reimbursement process. After all, employees won’t have to create a detailed expense report and provide all receipts to verify the amount spent during their travels. It’s quite straightforward, just know the fixed rates and stick to them.
Here are some of the benefits of per diem payments:
- Minimized administrative burden with limited paperwork
- Faster reimbursements with pre-approved payments
- Clear payment scale with standardized rates
Companies can supply employees with per diem payments by handing out money upfront, providing corporate credit cards, or reimbursing employee’s private spending.
Ultimately, per diem rates allow companies and employees to visualize expenses better before a trip takes place since it’s calculated based on predetermined metrics. Further in our blog, we’ll provide you with the latest per diem rates, but first, let us lay some groundwork on the concept of HMRC.
What are HMRC rules and regulations in the UK?
In the United Kingdom, HMRC (His Majesty’s Revenue and Customs) is an agency responsible for tax collection. Generally, HMRC travel expenses can be claimed back on tax if the employee travels to a temporary work location as a part of their work duties.
In order to claim HMRC travel expenses, an employee must provide evidence of traveling to and from a temporary workplace within the current or 4 previous tax years. For that reason, costs incurred while traveling between home and regular work location are not eligible for deductions.
Suppose your past or upcoming work-related trips fit the main HMRC condition, then you can apply for the meal allowance in accordance with the scale rate payments. In the following section, you’ll find the latest HMRC per diem rates.
UK per diem / meal allowance rates 2024
A company can reimburse corporate travel expenses like meals using custom or HMRC rates. While the UK government determines standard per diem rates, the special company-determined rates are calculated based on that company’s previous business travel expenses.
The HMRC can approve the custom rates if the company proves that its annual travel expenses are exceptionally high. However, standard scale rate payments continue to be the optimal option for most businesses.
HMRC meal allowance rates, last updated in January 2024, are the following:
| Minimum Travel Time | Maximum Allowance |
| 5h | £5 |
| 10h | £10 |
| 12h | £15 |
| 24h | £25 |
Shortly, employees must perform their duties outside of the regular work location and travel for at least 5 hours, in order to acquire a minimal meal allowance of £5. Knowing the following rates together with the travel time to a destination, allows companies to pre-calculate meal allowances.
Unlike HMRC mileage allowance, meal expenses have a reimbursement cap. Therefore, in cases where the cost of a meal is higher than a maximum meal allowance, the difference is either paid by the employee or the employer can reimburse it from the company’s pocket. In such cases, the difference would be considered as a taxable benefit.
It was already mentioned that employees don’t have to collect and provide receipts to qualify for the meal allowance. However, employees must prove that the meal was purchased in the course of a business trip as defined by HMRC.
Deductible expenses
Meal expenses can qualify for tax relief under several conditions. Most of the conditions ensure that the employee purchases meals while traveling or operating at a temporary work location. Knowing and understanding the following criteria decreases expense processing time and results in swift reimbursements.
Meal allowance can be claimed if
- The travel must be in the performance of an employee’s duties or to a temporary place of work, on a journey that is not substantially ordinary commuting.
- The employee should be absent from his normal place of work or home for a continuous period in excess of five hours or ten hours.
- The employee should have incurred a cost on a meal (food and drink) after starting the journey and retained appropriate evidence of their expenditure.
Meal allowance cannot be claimed if
- A meal or beverage is not purchased
- The meal does not constitute additional expenditure
- The “staying with friends or relatives allowance” is claimed
- Meals have been taken at home
- Meals are provided during a training course, conference or similar activity
- Meals are provided on the train or plane and included in the ticket cost
- Meals include alcohol*
*If the receipt attached to the meal expense claim includes the cost of alcoholic beverages, that cost is excluded from the reimbursement.
You should consider many HMRC rules when applying for a tax deduction. One of the most effective ways to ensure valid expense claims is to establish your own expense policy.
Setting your own expense policy
Companies must define a clear expense policy for their employees, to ensure allowable and reimbursable spending. The established guidelines allow employees and the company to determine whether expenses should be paid in full or only partly, depending on the alignment with the policy.
The content of any corporate policy depends on the company’s budget, culture and individual goals. However, several vital practices make an expense policy effective:
- Create categories – Inform your employees on what can be reimbursed from the company’s pocket and establish a spending limit for each category.
- Define clear limitations – Provide a list of non-reimbursable expense criteria. That could include fines, lost personal property and unauthorized service upgrades, among others.
- Acquire evidence – Define what can be used as valid proof of purchase, like receipts and invoices.
- Comply with regulations – Inform employees about the requirements for valid submissions and the penalties for fraudulent or duplicate claims.
- Encourage open communication – Allow your employees to ask for the pre-approval and processing of unique individual cases that don’t fit into basic expense categories.
The expense policy may include additional points for specific expense categories that correspond to HMRC regulations. Providing additional guidelines for per diem allowances streamlines the submission process allowing companies to speed up the expense reimbursements.
Set guidelines for per diem claims
Management of per diem expenses can use a set of standards to simplify the process for all parties. A guidebook or filter within your accounting system should provide all the necessary assistance for effortless expense submission.
The guidelines should be easy to understand and include:
- The step-by-step description of the pre-approval or compensation process, depending on the method of per diem payments: upfront cash, company credit card or expense reimbursement.
- The list with contact information of the personnel responsible for the reimbursement or pre-approval process.
- The criteria for reimbursement limitations, based on the per diem rates and date of expense acquisition: 5 years at maximum.
- The checklist of requirements for deductible travel expenses is based on the latest HMRC conditions.
The guidelines should be regularly updated to reflect any recent changes or variations in HMRC rates and regulations, allowing accurate compensation. Setting a spending limit is one of the most effective ways to ensure full reimbursement within a company’s budget.
Set spending limits
Hassle-free per diem payments rely on the spending limits minded by your employees. After all, a realistic budget sets clear expectations and prevents non-reimbursable overspending, avoiding employee dissatisfaction.
Moreover, effective travel budgeting significantly depends on how your company distributes per diem payments: through cash, a company credit card, or reimbursements from employee funds. Each method involves a different approach to setting a spending limit:
- The first method is straightforward. Employees receive an upfront one-time cash payment, which helps them easily control all travel expenses using physical funds: no receipts or expense reports are required.
- Most banks allow employers to set spending limits on the entire corporate account or individual cardholders for company credit card usage. The transactions are automatically limited, and all spending information is readily available for review by the accounting department.
- The third method requires a post-trip reimbursement of the employee’s personal funds. Your company can manually check employee spending or streamline the process by automating its per-diem payments with expense management software.
While cash payments and credit card limits provide clear barriers to overspending, expense reimbursements provide crucial flexibility. The budget for travel expenses often has to be adjusted based on destination-specific costs, which leaves no room for an additional cash allowance or delayed credit card adjustments.
Because of this, more and more companies are opting for automation software. With the help of expense management software, your employees can digitally apply for per diem compensations with spending limits for each expense category, allowing you to reimburse expenses like meal allowance automatically.
Automate your expense process with SpendControl
The process of managing per diem payments can be quite a hassle. Intelligent expense management software can automate the tedious process of manually registering and processing your travel expenses.
Our award-winning software – Klippa SpendControl – streamlines expense management processes, eliminating the risks of fraudulent and outdated receipts. Our AI-powered solution simplifies expense claim submissions in three simple steps and automatically transfers data to your accounting or ERP software through our direct integration possibilities.
The following video illustrates what an expense claim workflow could look like:
Eliminate manual data entry, swiftly approve expenses and invoices, prevent expense fraud, ensure faster reimbursements and improve your overall financial management within one dedicated platform. Boost employee satisfaction and comply with HMRC regulations while saving valuable time and reducing the need for manual labor.
Klippa SpendControl offers essential features to enhance your expense management:
- Accurate data extraction with our #1 OCR software
- Mobile & web environment with 24/7 access to your data
- Customized approval management with sophisticated business rules & authorization flows
- Built-in document fraud and duplicate detection with machine learning
- Multi-currency support with exchange currency feature
- Automated mileage registration with Google Maps integration
- All set accounting and ERP software integrations
Are you ready to streamline your per diem payments? Schedule a free demo to see our solution in action, or contact our SpendControl specialists for more details.