Jan 27, 2025
Business travel has become an essential aspect of work for many companies. Most people travel for business to visit other company branches, attend conferences and expos, or meet business partners in person.
Recent studies reveal that employees have become more willing to travel for work, seeing it as an exciting opportunity to explore new cities, network, and combine work with personal leisure.
However, things can become complicated when it comes to managing travel expenses. For employers, numerous nuances make this topic impossible to overlook.
In this article, we’ll guide you through the basics of business travel expenses and highlight key factors that may influence tax reimbursement . While most factors are universal in most countires, we’ll use the UK as an example.
Corporate travel expenses include all work-related costs incurred by an employee during a business trip. These include transport, accommodation, meals, congestion charges, tolls, parking fees, and mileage if you use your own vehicle.
As with other business expenses, companies can claim tax relief on travel costs incurred exclusively for business purposes. However, this is where some challenges can arise. Not all expenses are recognised by His Majesty’s Revenue and Customs (HMRC) as valid business costs. We’ll explore this in more detail later in the article, so keep reading!
To maintain organised bookkeeping, it’s essential to understand how business travel tax laws work. Generally, expenses that qualify as business travel are typically free from tax. Companies can claim tax relief for money spent on the following:
However, there are some nuances we want you to know about.
First, let’s distinguish between private and business travel, as this can often lead to confusion. During business travel, some expenses may actually be considered personal, making tax reimbursement impossible.
According to HMRC, only two types of journeys qualify as business travel:
So, visiting specific locations to fulfil job duties qualifies as business travel, but commuting to a regular workplace does not. Additionally, parking fines, speeding tickets, and other penalties are not considered business travel expenses.
Let’s now look at the differences between self-employed individuals and employees when it comes to business travel.
For self-employed, their first step is to identify their regular place of work. This will help determine what qualifies as their ordinary commute.
If a self-employed rents an office or workspace, that location is their regular place of work. However, if they don’t have an office and mostly work from home, their home will be qualified as their regular place of work. This is where things can get tricky.
Any journey between home and a regular workplace cannot be claimed as a business expense, as it is considered part of an ordinary commute. For example, a handyman with an office who frequently travels to various clients can only claim expenses for those client visits. Claiming tax reimbursement for commuting to his office is not possible.
Next, let’s discuss business travel expenses for employees. However, the general rules outlined in the next section also apply to self-employed sole traders.
Employees don’t have to cover the costs of a business trip from their own pockets. Employers typically cover all expenses incurred during the business trip.
However, some exceptions are based on the concept of a ‘permanent and temporary workplace’. It’s often easier to understand this with an example.
A Logistics Manager usually works in the office, but they visit the company’s warehouse once a month to perform calculations and assess parcel processing. The office and the warehouse are on opposite sides of the city, so each time they travel to the warehouse to perform their work duties, it is considered a visit to a temporary workplace and can be claimed as a travel expense.
Let’s explore this further to avoid any potential pitfalls.
A permanent workplace is where an employee works regularly, at least once a week, on a long-term basis. As we already know, travel to and from your permanent workplace is classified as an ordinary commute, which is not an allowable expense.
Also, there may be a ‘temporary workplace,’ which refers to a location where the employee goes to perform short-term tasks. However, if the task lasts more than two years and they spend more than 40% of their time there, it becomes a permanent workplace and is considered part of the ordinary commute. For more information, check HMRC.
The same principles apply to self-employed individuals. Commuting to and from their permanent workplace is not allowed as a business expense. However, any travel for purely business purposes to locations different from their permanent workplace is permitted.
They can also claim travel costs when travelling to a temporary workplace, provided it is significantly farther than the permanent one, or if the travel costs exceed the regular commuting expenses.
In this case, eligible costs include public transport (bus, metro, train), ride-hailing, and motor expenses if the employee uses their own car.
The rules regarding meals and drinks are similar for self-employed and employees. Daily meals or coffee are typically not claimable as business expenses. However, meal costs incurred during occasional, non-routine travel may qualify. In other words, meals outside the usual work routine — such as breakfast at the airport cafeteria — are generally acceptable.
Returning to the example of the handyman who travels from client to client each day, their travel costs are allowable, but lunch is not, as it forms part of their regular work pattern.
However, a sales manager travelling from the office to attend an expo can claim both travel and meal expenses for the entire day. This is because they are away from their regular workplace, and the meals they purchase fall outside their usual work routine.
If the business trip requires an overnight stay, the employee can claim the cost of accommodation as well as reasonable expenses for their evening meal and breakfast. The general rules are very similar for both employees and the self-employed.
Additionally, the employee is entitled to tax-free reimbursement for personal incidental expenses. This includes items such as private telephone calls, laundry, and newspapers. The maximum amounts of incidental overnight expenses an employer can pay tax-free are:
When calculating the total expenditure, any VAT paid must be included.
Important note: Expenses claimed for locations close to your usual workplace may not count as subsistence. Also, remember that HMRC guidelines specify that costs must be reasonable.
As an employer, you must keep a record of all expenses and benefits provided to the employees.
Your records should demonstrate that you have reported accurately and that your end-of-year forms are correct.
HMRC may request evidence of how you accounted for each expense or benefit at the end of the tax year.
You’ll need to keep a record of:
Records must be kept for 3 years from the end of the tax year to which they relate.
If you provide the employees with a set amount of cash to cover common business expenses, such as travel and meals, these are known as ‘scale rate payments’.
As long as your employee has used the scale rate payment for business expenses, you won’t need to check every single receipt — it’s fine to just check a sample.
You can set up a scale rate payment by either:
For international travel, there is a separate benchmark for employees travelling outside the UK.
If a country is not listed, you can use the rates for the city geographically closest to your destination.
Unless an expense or benefit is considered an ‘exemption,’ you must deduct tax and National Insurance contributions from all employee benefits and report them to HMRC.
Business travel, phone bills, uniforms, and tools for work are all considered exemptions. To qualify, you must either reimburse the exact costs or pay the benchmark rate. There’s no need to apply for an exemption unless you wish to offer bespoke rates to employees.
If you reimburse actual costs, the amount will be tax-free up to the limits set by HMRC. Any reimbursement above the allowed amount will be treated as earnings and will be subject to tax and National Insurance. See more information at: https://www.gov.uk/employer-reporting-expenses-benefits/dispensations.
As we discussed earlier, employers must keep a record of all expenses, which can be particularly challenging when it comes to ride-hailing. Employees must collect and store all the receipts until the end of the business trip.
Then, the receipts must be passed to the accountant and manually recorded as business travel expenses. If a business trip lasts several days and involves multiple journeys daily, keeping track of invoices for all rides can be a hassle for the employee.
With Bolt Business, you have full control over employee rides, budgets, and invoicing. You can create groups and allocate personal budgets for each. Seamless integration with major expense management software ensures that all invoices are kept in perfect order, with nothing lost.
In addition to eliminating paperwork, Bolt Business offers secure and affordable business rides in over 600 cities worldwide.
