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We provide accounting, tax and business advice to individuals, family, and owner-managed businesses from across our offices in Leeds, Manchester, Newcastle and York.

Nick Davies, Senior Tax Consultant

Do you want to increase net pay and reduce your employment costs?

From 6 April 2009 HMRC have introduced an advisory system of benchmark scale rates which employers can use to make tax and NIC free subsistence payments to employees who travel on business. The daily rates are as follows:

Breakfast Rate	(irregular starts before 6am)	£5
One Meal Rate	(away from home or usual base for over 5 hours)	£5
Two Meal Rate	(away from home or usual base for over 10 hours)	£10
Late Evening Meal Rate	(irregular finishes after 8pm)	£15

Employers can obtain a dispensation to pay these allowances free of tax and National Insurance with no requirement for employees to provide receipts. The only requirements are that the employee must travel in the performance of the duties; must be absent from home or usual place of work for more than 5 or 10 hours; and must incur a cost on a meal after starting the journey.

In cases where employees didn’t previously receive subsistence payments, many employers have introduced the new allowances under a Salary Sacrifice arrangement. Under these arrangements the employee gives up an element of pay on which they previously paid tax and NIC in exchange for the same amount of subsistence allowance. This increases the take home pay of the employee by the amount of tax and NIC they would previously have paid. For a Basic Rate taxpayer who regularly travels for over 10 hours a day, take home pay could increase by over £700 per annum. This is the equivalent of a 5% pay increase for an employee earning £20,000 per annum.

The employer would also achieve a saving of Employers NIC, which, at current rates, would amount to 12.8% of the total amount of the Day Subsistence Allowances. Using the example above, the employer saving could amount to over £300 per annum.

Many haulage firms, in particular, have already taken advantage of these arrangements to the general delight of their drivers – before April 2009 lorry drivers could be paid Day Subsistence Allowances of only £2 per day. However, these arrangements are of potential benefit to many other sectors where employees are routinely on the road, for instance maintenance engineers or delivery drivers.

Although relatively easy to introduce, professional advice is needed. The arrangement involves a change to contractual Terms & Conditions of employment, robust record keeping is vital, and consideration must be given to the possible impact on certain state benefits. We can guide you through the entire process to make it as easy as possible and employers who have already introduced such a scheme will vouch for its popularity with the workforce, particularly where there has been a wage freeze.

Nick Davies spent a number of years with HMRC, and has subsequently accumulated over 20 years experience in the accountancy profession. He has been a Senior Manager with both Ernst & Young and Grant Thornton, and has vast experience of advising companies of all sizes on employee-related matters. He advises a number of “blue chip” international groups on Employment Taxation, but is equally happy dealing with SMEs. Nick has particular expertise on the tax efficient re-structuring of car fleets; he is also a regular contributor to many industry publications.

At Garbutt & Elliott we have considerable experience of advising businesses on all aspects of employer solutions, helping businesses to pay less tax. If you would like to discuss how we could add value to your business, please contact Nick Davies, Leeds (0113 2739600), York (01904 464100), or by e-mail to ndavies@garbutt-elliott.co.uk