RHA briefing tax allowable subsistence

1. Drivers Overnight Subsistence
Briefing Paper
This Briefing Paper aims to provide accurate, authoritative information and comment on the subject it covers. The information
contained within it is correct at the time of publication. The Road Haulage Association cannot accept liability for any civil or legal
action taken by or against any user of this paper. January 2011.
Important Note:
Notwithstanding the information outlined below, there should not be any profit element of any
subsistence payment to a driver. If there is, PAYE is liable to the driver and NIC’s for both
driver and employer for that occasion. Therefore, employers must make random checks to
ensure their drivers are incurring expenses that at least equal, if not exceed, the subsistence
payment being made.
HMRC do require that, in order for an employer to be satisfied that expenses have been
incurred, random checks should be undertaken. The size of sample and frequency of checks
are dependent upon:
• The size of the company/business
• The number of employees
• The number of employees who qualify for the allowance.
• The nature of the work undertaken by the employer and its employees.
• The management processes that are already in place to monitor the payment of the
allowance
This will be up to the judgement of HMRC and be agreed with the relevant employer.
It is important to note that the cost of subsistence only qualifies for the tax relief if incurred
during the qualifying travel. HMRC will not accept that tax relief is available for the costs of
food or other subsistence incurred and brought from home, or, indeed, bought while driving to
a depot to pick up the lorry or other vehicle for the day.
Overnight Subsistence Allowance
Long distance LGV drivers normally receive a payment in respect of each rest period spent away from
the home base. The payment includes a subsistence element and sometimes a further amount
calculated at normal time rate or as a round sum allowance. The part of any rest period payment
calculated at the time rate or additional round sum payment is chargeable to tax.
The subsistence allowance could cover the cost of the evening meal and breakfast in addition to the
cost of overnight accommodation. Employers should be aware that:
a) it is their responsibility to determine the nature of payments made to the employees;
b) the subsistence element or other subsistence payments may be paid in full provided that
i) documentary evidence is available to show that the employee concerned had spent
the night away from home and his normal place of employment and incurred extra
expense in so doing; and
ii) the amounts paid are no more than a reasonable amount to cover the extra costs
involved.
c) provided that the documentary evidence((b)i above) is available, HMRC will accept that the
nationally agreed overnight subsistence rate per night spent in the UK away from the drivers
home and base does no more than reimburse the extra expense incurred.

2. d) An employer wishing to make subsistence payments in excess of this amount without
deducting tax and may do so, provided that
i) the payments merely reimburse the actual expenditure incurred and are made
against formal claims from the employee concerned, or supported by suitable
evidence, for example receipted bills etc; or
ii) the arrangements under which such payments are made have received the formal
approval of HMRC
e) Subsistence payments in circumstances not covered above that exceed the nationally agreed
limit should be subjected to tax.
Suitable documentary evidence would include:
• drivers' log sheets
• drivers' expenses claims
• receipts obtained on payment for lodgings eg bed and breakfast bills
• parking receipts and itinerary records kept by the employer in the pay records, or separately,
as evidence of nights away from home and base.
However, the list is not exhaustive and further enquiries may be made by HMRC in order to satisfy
themselves that no deduction of tax from payments made was justified. The subsistence payment can
be made to porters having nights out when accompanying drivers in removals operations where the
driver concerned is paid the subsistence rate, in accordance with the above conditions.
Where digital tachographs are being used, a record must be kept confirming that the driver was away
from home and normal base overnight, and their overnight destination.
Lorries with Sleeper Cabs
The onus is on the employer to satisfy himself that any amounts paid free of tax are no more than a
reasonable reimbursement of the average allowable expenses of the driver whilst staying away from
home and place of work overnight. The mere fact that a lorry has a sleeper cab does not prevent the
employer paying an amount tax free up to the nationally agreed limit provided that he is satisfied that
the driver did incur expenses on overnight accommodation and meals.
Where the employer knows that the driver uses the sleeper cab, he should pay free of tax only what
represents a reasonable reimbursement of:
• evening meal and breakfast
• washing facilities
• upkeep of bedding in the cab
Provided there is documentary evidence available to show that the employee concerned spent the
night away from home and his normal place of employment, HMRC will accept that a payment of 75%
of the nationally agreed figure does no more than reimburse the extra expense incurred when the
driver uses the sleeper cab overnight. Where an employer wishes to make payments in excess of this
amount without deducting tax he may do so provided he satisfies the conditions outlined above in (d)
Where digital tachographs are being used, a record must be kept confirming that the driver was away
from home and normal base overnight, and their overnight destination.

3. The amounts of overnight subsistence negotiated and agreed by the Road Haulage Association with
HMRC, effective from 1 January annually, are as follows:
• 2011 - £32.20 (sleeper cab rate is £24.15)
• 2010 - £30.75 (sleeper cab rate is £23.06) unchanged from 2009
• 2009 - £30.75 (sleeper cab rate is £23.06)
• 2008 - £29.85 (sleeper cab rate is £22.39)
• 2007 - £28.62 (sleeper cab rate is £21.46)
• 2006 – £27.55 (sleeper cab rate is £20.66)
• 2005 - £26.90
• 2004 - £26.00
• 2003 - £25.15
75% of the above figures should be used where drivers use sleeper cabs. These rates are negotiated
with HMRC in January each year, and the new rates are published at www.rha.uk.net.
Overseas Travel
The amounts shown above relate to allowance for nights away from home and base in the UK. They
may not be appropriate for overnight subsistence on continental journeys, where costs can and do
vary from country to country. Companies that have drivers travelling regularly to Europe, and beyond,
may agree higher daily rates by providing their HMRC office with evidence of higher and other costs
eg costs of currency conversion and fluctuation; additional costs may include 2 or more showers per
day (especially in Mediterranean areas in summer), bottled water, parking in secure areas
(particularly taking account risk assessment and the need to protect the vehicle, load and driver -
these areas tend not to provide the cheapest local food). Again, formal dispensation should be agreed
before higher amounts are paid.
Mid-Day Meal Allowances
Many employers meet the cost of, or contribute towards, a drivers mid-day meal by either issuing
meal vouchers or making a cash payment. These contributions may be treated as not taxable where
they:
a) are reasonable in amount, ie they do not exceed £2.00 per day; and
b) are paid to long-distance lorry drivers whose duties oblige them to take meals away from their
home and normal place of employment. Similar treatment may also be given to coach drivers
in comparable circumstances, but not to drivers who have fixed or local routes.
The guidance provided by HMRC states that where the amounts paid exceed the above thresholds,
the excess should only be paid without deduction of tax if the employer satisfactorily demonstrates
that the additional amount paid only reflects the actual additional expenditure incurred by drivers or
where dispensation has been given by HMRC. The onus is on the employer to satisfy himself that
expenditure of the relevant amount is actually being incurred by the driver. If the employer has no
acceptable evidence to justify the rate paid, the amounts paid in excess of £2.00 per day should be
paid under deduction of tax. However, it is recommended that if more than £2.00 is being paid
dispensation should be sought. The £2.00 per day mid-day meal rate has not increased since 1988.
Incidental overnight expenses
" Incidental overnight expenses", up to the value of £5 per day if in the UK, or £10 per day outside the
UK, can be paid tax free in addition to subsistence and a meal allowance in accordance with
Appendix 8 of the HMRC booklet 480 (“General Rules for the Treatment of Employment Expenses”).
Employees staying away from home overnight on business often incur additional expenses of a
personal nature, such as newspapers, laundry and calls home. Although this may arise as a

4. consequence of working away from home it is not incurred necessarily nor in the performance of the
employee's duties. Under the expenses rule that apply to travel costs this type of expenditure would
not be allowable as a deduction. If this expenditure was met either wholly or in part by the employer
tax would be due. A special exemption provides that employers can pay for incidental overnight
expenses relating to a qualifying absence up to a tax free limit, without any tax consequences for the
employee – or NI for the employer. However, as with the subsistence and meal allowances,
employers must ensure that the expenses are actually being incurred and have the necessary checks
in place. If the employers payment exceeds the tax free limit the whole payment becomes taxable, not
just the excess. If these payments are to be made we recommend they are done so with the
knowledge and written consent of the local HMRC office.
National Insurance
Where payments are made tax free in accordance with the requirements outlined above, they do not
usually attract NI.
P11D's
The mid-day meal allowance and overnight subsistence allowance should be included in P11D's
unless the company concerned has agreed dispensation with their own local HMRC office.
Licence & Medical Costs
Where an employed driver meets the cost of renewing an LGV licence and any medical costs directly
related to renewing that licence from his or her own pocket, the driver may claim tax relief for those
costs. Drivers who get a tax return can make a claim by entering the appropriate amount on the
return. If they do not get a tax return, they can make a claim by letter or on form P87 which they can
request from their tax office.
Self Employed Drivers
HMRC has confirmed that the agreed rates do not apply to drivers who are self-employed. The rule
for them is that in calculating their profits for tax purposes they can deduct expenses incurred "wholly
and exclusively" for the purposes of their trade. The following has been provided by the HMRC, from
their Business Income Manual.
BIM37670 - Wholly & exclusively: Duality of, or non-trade, purpose: Accommodation and subsistence:
The approach in 'itinerant' [travelling] trades:
What to do in practice
The cost of meals taken away from the place of business is not in general an expense incurred wholly
and exclusively for business purposes, since everyone must eat in order to live. Where such costs are
disallowable they cannot be apportioned to allow extra costs incurred from the necessity of eating and
drinking away from home or the place of business.
Itinerant trade journeys outside the normal pattern
But extra costs may be incurred wholly for business purposes where a business is by its nature
itinerant (for example in the case of commercial travellers), or where occasional business journeys
outside the normal pattern are made. Inspectors may allow a deduction for reasonable expenses
incurred in these circumstances.
Overnight accommodation and subsistence
Where a business trip necessitates one or more nights away from home, the hotel accommodation

5. and reasonable costs of overnight subsistence are deductible. This does not extend to overnight
accommodation and subsistence at the base of business operations, even if there is a contractual
requirement for the trader to reside in a particular place. The reasonable costs of meals taken in
conjunction with overnight accommodation are allowable, whether or not paid on the same bill.
Long distance lorry drivers subsistence
The same treatment may be extended to self-employed long distance lorry drivers who spend the
night in their cabs rather than take overnight accommodation. The text of a Tax Bulletin article, August
1993, page 88 is as follows
Lorry drivers: trade deductions: meals: cost of
In considering the application of ICTA88/S74 (a) to the cost of meals taken away from the place of
business, the Courts have held that no deduction is due because it cannot be said that the expense
was incurred wholly and exclusively for the purposes of the trade since everyone must eat in order to
live.
However, HMRC have long accepted reasonable claims for the cost of evening meals and breakfast
taken in conjunction with overnight accommodation if the cost of the accommodation would otherwise
be allowable as an expense in carrying on the trade or profession. This practice has received the
approval of the Courts.
Long distance self-employed lorry drivers have therefore been able to claim a deduction for the
reasonable cost of meals taken in conjunction with overnight accommodation.
HMRC have been asked whether this treatment can be extended to such drivers who spend the night
in their cabs rather than take overnight accommodation and have confirmed that it can.
It should be emphasised that it is only `reasonable' expenses which may be allowed and the
expenses claimed must be supported by adequate contemporaneous records.
Ruth Pott. January 2011.