Business travel is an exciting part of any job as it presents opportunities to discover new cities, make valuable connections, and seize career-changing prospects. Unarguably, the best part of it all is that you can enjoy the experience and return the majority of money spent during the journey.
However, handling expenses post-trip is proven to be a hassle for many employees. After all, dealing with expense registration and knowing which costs can be deducted and which can’t is a highly confusing process, especially when it comes to HMRC regulations.
In this blog, we will help you understand the core of HMRC travel expenses and provide you with a guide on deductible costs. We will also tell you about some of the best practices and tools for travel expense management that will keep business travel fun.
What are travel expenses?
Travel expenses are the costs incurred during a business trip or any work-related travel away from the standard work location. Travel expenses might include transportation, accommodation, meals, and other costs related to business travel.
HMRC (His Majesty’s Revenue and Customs) travel expenses refer to the costs incurred for business-related travel that you can claim back on your tax. Understanding the HMRC travel expense regulations is important for several reasons:
- Pay less taxes: Claiming allowable travel expenses can lower your taxable profits and decrease Corporation Tax. Essentially, a lower taxable profit results in lower taxes.
- Save costs: Your company can effectively manage and reduce its overall operational costs by claiming travel expenses back.
- Ensure compliance: Correctly reporting and claiming travel expenses ensures HMRC compliance and allows companies to avoid penalties.
- Be on top of your financial records: Accurate recording and claiming of travel expenses contribute to the validity of your company’s financial records and a full overview of your financial health.
As we established the meaning and importance of HMRC travel expenses it is crucial to realize which of your travel costs actually qualify for tax return.
Which travel expenses are deductible?
When it comes to deducting travel expenses, there are many rules to follow. Fortunately, HMRC has provided clear guidelines on which costs can be reimbursed and the requirements for a trip to qualify as “business travel.”
Shortly, travel expenses can be deducted if they are obtained while traveling to and from a temporary work location during the current tax year or the 4 years preceding it. Hence, you’re not eligible for tax relief on travel expenses made from your home to your standard work location and vice versa.
According to the HMRC, you can submit the following travel expenses incurred during your business trip:
- Public transport costs
- Overnight accommodation
- Meals
- Congestion charges and tolls
- Parking fees
- Business phone calls and printing costs
- Business mileage*
* When traveling to a temporary work location, you can claim tax relief on business mileage using cars, motorcycles or bicycles. The claimed amount will depend on the approved mileage rate and whether you use your own or company vehicle.
Notably, in order to claim the cost of an overseas trip you must provide evidence that the travel was absolutely necessary to perform employee duties. Trips that didn’t include client meetings or contractual arrangements and were initiated solely for educational or networking purposes cannot be claimed as a deduction.
Now you can see that claiming tax relief for some travel costs can be quite tricky. Properly managing travel expenses requires knowledge of HMRC regulations and a streamlined documentation process. In our next blog section, we’ll explore effective techniques for handling these costs.
Best practices for travel expense management
Travel expense management can be overwhelming, especially if your business revolves around international clientele. At some point, dealing with never-ending expense claims can prove to be a tedious and time-consuming task that uses up important resources.
Here are some of the best practices that will help you to track all your travel expenses in an efficient and timely manner:
Establish clear communication
Inform your employees of the expense reimbursement procedure. Answer to what information is required, who is responsible for processing it and when it should be submitted. Provide a guidebook or integrate a dedicated platform that streamlines the submission process.
Set submission criteria
Accept and process reimbursement requests that contain all crucial data. Analyze expense claims that include a copy of the transaction and align with the current or previous four tax years, allowing you to claim tax relief successfully.
Regularly update and organize data
Keep your travel records up-to-date and separate them from other employee expenses for HMRC reporting purposes. Use folders or digital filters to analyze a year’s worth of data effectively.
Eliminate expense fraud
Invest in fraud detection systems. Avoid errors and fraudulent reimbursements that can harm your company’s financial health and put you at risk of penalties for submitting illegitimate receipts for tax relief.
Automate your expense management
Take advantage of travel management tools to streamline your expense management and save time on repetitive manual tasks.
Manage travel expenses with SpendControl
Forget about the manual receipt processing with Klippa SpendControl! Our intuitive app auto-scans and uploads expense data to your system. Authorized personnel can immediately review and approve transactions. Once finalized, booking expenses with our accounting and ERP integrations is possible with just one click!
Eliminate the need for manual data entry, ensure compliance with HMRC regulations, and prevent fraud within one dedicated platform. Increase employee satisfaction and get better financial insights while saving valuable time and reducing the need for manual labor.
Klippa SpendControl provides some of the key features for upgrading your expense management:
- Mobile & web environment with 24/7 access to your data
- Accurate data extraction with our #1 OCR software
- Automated mileage registration with Google Maps integration
- Built-in document fraud and duplicate detection with machine learning
- Customized approval management with business rules & authorization flows
- Multi-currency support with exchange currency feature
- Set to go accounting and ERP software integrations
Are you ready to upgrade your travel expense management? Trust our platform to simplify your expense approval process and achieve optimal results. Book a free demo to see our award-winning solution in action, or contact our SpendControl specialists for more information.