The Income Tax (Approved Expenses) (Amendment) Regulations 2019
14 March 2019
Regulations come into force on 19 March to remove the requirement for employers to check receipts from April 2019 when reimbursing employees for subsistence using benchmark scale rates.
Background
Many employers pay or reimburse employee expenses incurred while travelling for their job. Employers can either pay or reimburse actual expenses for which they must provide receipts or use scale rates set by HMRC. Overseas scale rates are concessionary amounts currently set out in HMRC guidance that are provided by HMRC as an administrative easement for employers. Employers can use these rates as the maximum amounts for paying or reimbursing accommodation and subsistence expenses to employees, whose duties require them to travel abroad, free of tax and National Insurance contributions.
The rates are dependent on the country and city the employee visits along with the length of time of the visit. Many employers find the overseas scale rates a useful and simple way to reimburse employees for the costs they incur while travelling abroad for work. As the overseas scale rates are concessionary there are no requirements for employers to check employee receipts.
The government undertook a call for evidence on the taxation of employment expenses in summer 2017 where employers indicated that they found the overseas scale rates useful and also called for stability and predictability in the expenses rules.
In response the government announced its intention at Autumn Budget 2017 to introduce new legislation to bring the concessionary overseas scale rate payment system into legislation. This will give employers certainty and clarity in their expenses practices in the future.
Section 10 of the Finance Act 2019 provides a new tax exemption for expenses incurred in the course of qualifying travel that have been paid or reimbursed in accordance with regulations on the condition that employers ensure that employees are undertaking qualifying travel. Qualifying travel means travel, the expenses of which are deductible from an employee’s income when calculating this for income tax purposes under Chapters 2 or 5 of Part 5 of ITEPA.
The Income Tax (Approved Expenses) (Amendment) Regulations 2019 introduce the concessionary overseas scale rates into legislation using the power introduced by section 10 of FA 2019.
From April 2019 employers will no longer be required to check receipts when reimbursing employees for subsistence using benchmark scale rates.