Expenses FAQs - Tax
Section 1 – University travel
1. Will I pay tax or NIC on the mileage rates I claim under the expenses policy for using my car, motor cycle or bicycle on University business?
No. The rates reimbursed are in line with those published by HMRC and can be reimbursed to you by the University free of tax and NIC.
If you use your own vehicle, motorcycle or bicycle, the rates published by HMRC and adopted by the University for the purposes of reimbursing staff for business journeys, incorporate the cost of running and maintaining your vehicle, such as fuel, oil, servicing, repairs, insurance, vehicle excise duty and MOT. The rate also covers depreciation of your vehicle.
Please note that electric or hybrid car rates are currently approved by HMRC at the mileage rates for cars and vans.
2. Why is it not possible to make a claim for accommodation costs when staying with friends or family whilst working away from home on University business?
When a staff member spends a night away from home whilst on University business, they may choose to stay with a friend or relative instead of staying in a hotel. As there is no cost incurred, there is no basis for a valid claim in these circumstances. However, where a staff member incurs the cost of an evening meal, the cost may be claimed where supported by a valid receipt.
3. Section 1 - The Expenses Policy states that the University will not reimburse the cost of ordinary commuting or private travel. What do these terms mean?
Ordinary commuting & private travel
In general, there is no tax relief available for ordinary commuting, i.e. the cost of travel between an employee’s normal workplace and:
• an employee’s home
• any other place the employee visits for non-University work reasons (private travel)
Therefore, ordinary commuting is generally the journey you make most days between your home and your normal place of work (i.e. the place you regularly attend to perform the duties of your employment).
It is usually clear whether an employee has a normal workplace and, therefore, whether a journey to or from that place is ordinary commuting.
Examples of ordinary commuting:
Simon is an employee of the University on a fixed-term contract to carry out 12 month's work at King’s Buildings. He lives in Stirling and travels to Kings Buildings each workday, travelling back to Stirling each evening. His journeys between Stirling and Kings Buildings are classed, for tax purposes, as ordinary commuting.
Jenny is sometimes required to attend her normal workplace at Easter Bush outside normal working hours – for example, at the weekend. This means she incurs extra costs on bus fares, the cost of meals eaten at her desk. No tax relief is available for any of this expenditure because all journeys between home and her normal workplace are ordinary commuting. It makes no difference that Jenny is required to make the journeys or that they are made outside of her normal working hours.
Philip is employed by the University within ISG. He normally works at Argyle House. However, to enable him to look after his relative who is unwell, Philip’s line manager agrees that he can work at his relative’s home for a few weeks. Philip is not entitled to tax relief for travel to or from his relative’s home. Although Philip carries out the duties of his employment there, his attendance at his relative’s home is not an objective requirement of his job. His journeys are classed as private travel.
In exceptional circumstances (i.e. with evidence provided to support the exception and the one-off nature of the costs), a payment for travel from home to an employee’s normal workplace may be permissible. This will only be considered when approved by the claimant’s line manager or budget holder AND with prior approval from the Finance Department (email@example.com). Any approved ordinary commuting journey costs should be processed via payroll as statutory deductions of PAYE and NI contributions are due and payable.
4. Section 1 also states that the University will reimburse the cost of necessary travel for University purposes between one University workplace and another temporary place of work for meetings or other purposes (on University or other premises). What constitutes a temporary place of work?
The most common example of necessary business travel is a journey between one workplace and another in connection with your employment with the University (e.g. you travel from your normal workplace at Kings Buildings to Easter Bush for a meeting and back to Kings Buildings). The cost of such travel is incurred in actually carrying out the duties of your employment and is an allowable expense, for which tax relief is also due.
A workplace is temporary if an employee’s attendance there is only to perform a task of limited duration or for a temporary purpose. HMRC consider ‘limited duration’ in this context to be a period not exceeding 24 months. ‘Temporary purpose’ is considered to mean a particular reason or self-contained activity which is not a continuation of a particular task(s). Travel between an employee’s home and a temporary workplace is allowable for tax purposes and is not considered by HMRC to be ‘ordinary commuting’.
It should be noted that the temporary workplace should also be in a location significantly removed from an employee's normal place of work for it to be considered as a temporary workplace under these rules.
Some staff may have more than one permanent workplace. Security staff, for example may be required to work at a number of different, defined locations during the normal course of their employment. Only where there is a specific, temporary assignment that satisfies the criteria defined above will it be possible to allow travel expenses between home and a temporary workplace.
Note: Staff are not able to convert ordinary commuting journeys into allowable business journeys by stopping off at another workplace between home and their normal place of work.
4.1 Example of allowed expense: Travel to a temporary workplace
Andy travels 20 miles to his usual place of work at Kings Buildings every day. One day, however, he is asked to attend an early morning meeting 20 miles from home but in the opposite direction. Although this journey is the same distance as his normal commute, it is allowable as a journey to a temporary workplace since it is sufficiently different from his ordinary commuting and satisfies the criteria defined above.
4.2 Example of disallowed expense: Calling in to another place of work
Julie travels from her home in Newcraighall to her usual place of work at the Pleasance every day. On her way she passes Peffer Mill Playing Fields (where she occasionally goes in the normal course of her duties). One day she decides to drop off some papers at Peffer Mill on her way to work. This does not count as an allowable journey to a temporary workplace as the decision was optional and Peffer Mill is on the route of her ordinary commuting journey.
More than one normal place of work
Certain employees may have more than one normal workplace. Security staff, for example may be required to work at a number of different, defined locations during the normal course of their employment. Only where there is a specific, temporary assignment that satisfies the criteria defined above will it be possible to allow travel expenses between home and a temporary workplace.
Section 2 – Subsistence
5. Is the personal incidental expenses limit of £5 for overnight stays in the UK, and £10 for the overnight stay is outside the UK, paid tax-free?
The per day rates of £5 or £10 per night are no longer applicable and must not be claimed for nights away from home.
The actual costs of personal incidental expenses such as newspapers, private calls, laundry, non-alcoholic drinks, etc. can be claimed provided that the total amount spent on such items amounts to no more than £5 per night (where the night is spent in the UK) or £10 per night (where the night is spent outside the UK). Receipts are required for all expenditure where possible.
6. When I make a claim for subsistence costs incurred for University purposes in line with Section 2 of the expense policy, will the subsistence costs be reimbursed free of tax?
For tax purposes, travel expenses include subsistence costs attributable to necessary journeys undertaken for University business purposes. So, to the extent that travel is between University or other premises for work purposes, or involves travel from home to a temporary workplace, the cost of necessary subsistence associated with those journeys attract tax relief in the same way as the travel costs.
If an employee is required for genuine business reasons to entertain existing academic or other business contacts in the course of his or her duties, the cost of doing so can be regarded as satisfying the statutory “wholly, necessarily and exclusively” test (also see Section 3 below).
Reciprocal entertaining between business acquaintances, even though some business topic happens to be discussed, may actually take place for social and not University business reasons and, if so, this expense is not allowable. Thus no tax relief can be given for entertaining personal friends/business acquaintances where there is no business obligation to do so.
7. Can staff entertain students, external examiners, speakers, job candidates and claim reimbursement tax free?
Necessary costs of meals taken elsewhere other than on University premises will be reimbursed. This hospitality is treated as taxable staff entertaining unless external examiners, visiting speakers or lecturers, external collaborators on research or other projects, potential or actual sponsors or donors, government officials, or other publicly-funded organisations are present. The meal must be an integral part of the meeting.
Staff in attendance must be proportionate with the number of visitors with a maximum ratio of 3:1 University employees to external guests. This ratio is a critical factor in determining whether such expenses are tax allowable for the University
Section 3 – Hospitality & Entertaining for University Purposes
8. What is meant by expenditure that is incurred “wholly, necessarily and exclusively”?
This is a statutory test used to establish whether expenditure incurred by an employee qualifies for relief from tax and NIC. The strict nature of the tests that need to be satisfied mean that, in practice, there are very limited circumstances in which an expense can be reimbursed free of tax/NIC. The general tests that apply in relation to the expense are:
- it must be one that each and every holder of that employment would have to incur;
- it must be necessarily incurred;
- it must be incurred in the performance of the duties of the employment;
- it must be incurred and paid;
- the expense must be wholly and exclusively so incurred (prevents tax relief for general expenses which serve a dual business/private purpose).
In relation to the first test above, the cost must be one that is “necessarily” imposed on the employee by the duties of their employment. The test is an objective one and looks at the requirements of the job itself rather than the circumstances or preferences of any particular individual doing it.
Section 4 – Other Business Expenses
9. What constitutes Away days/strategy days/team building events for tax purposes?
The cost of “Work- related training” exempt from tax and NIC, and is defined in fairly wide terms as “any training course or other activity which is designed to impart, instil, improve or reinforce any knowledge, skills, or personal qualities which:
- are, or are likely to prove, useful to the employee when performing his/her duties or
- will qualify or better qualify the employee to undertake the employment, or to participate in charitable or voluntary activities arising through the employment”.
The following costs if incurred would not be considered to be covered by the exemption:
- facilities or benefits for entertainment or recreational purposes which are not in any way connected with acquiring the knowledge, skills, or personal qualities which satisfy the definitions of work-related training (normal meals, refreshments and leisure activities offered within a training course or event are not taxable).
- reward the employee for performing, or performing in a given way, the duties of his/her employment
10. Non-business and social events -annual parties and similar functions – what is exempt from tax?
Certain events or functions for staff and others can be considered non-taxable even where their primary purpose is not business but social entertaining. The following conditions must be met:
- The event is regular in nature (i.e. at least annually) and not a one-off; and
- The event is open to staff generally within the department at one location and not limited to specific groups; and
- The total cost of all such events in any one tax year does not exceed £150 per head.
This means that annual events, such as Christmas or Summer parties, or events that occur with similar regularity (e.g. every term) can be considered as tax exempt as long as they fulfil the other two criteria. One-off events cannot be considered as exempt.
The openness of an event is equally important and where it is limited to a research group, team, other unit in a school, or planning unit, rather than the whole department, then it will not be possible to consider it as exempt.
Taxable events that do not meet all of the above conditions for exemption must be treated as taxable entertaining.