Running a startup or a small to medium-sized enterprise (SME) comes with its fair share of challenges. One area that often causes confusion is travel and subsistence expenses. Knowing what you can claim can make a significant difference in your company’s financial health.
In this post, we’ll break down what you need to know about these expenses, ensuring you make the most of allowable deductions and avoid unnecessary pitfalls.
What are travel and subsistence expenses?
Travel and subsistence expenses cover the costs incurred when you or your employees travel for business purposes. This includes expenses like transport, accommodation, meals, and other incidental costs. It’s essential to distinguish these from personal expenses, as only business-related travel can be claimed.
Travel expenses
Travel expenses can be broadly categorised into several types, each with its own rules for what can be claimed:
- Public transport: Costs for trains, buses, and flights can be claimed as long as they are directly related to business activities. Ensure you keep all tickets and receipts as proof of travel.
- Mileage: If you or your employees use personal vehicles for business travel, you can claim a mileage allowance. The HMRC-approved mileage rates are 45p per mile for the first 10,000 miles and 25p per mile thereafter for cars and vans. For motorcycles, the rate is 24p per mile, and for bicycles, it’s 20p per mile.
- Taxis and car hire: Taxi fares and car hire costs for business travel are also allowable. However, it’s crucial to have receipts and, if possible, a clear justification for why a taxi or car hire was necessary over other forms of transport.
Subsistence expenses
Subsistence expenses relate to the cost of food, drink, and accommodation when you or your employees are away from the usual place of work:
- Meals: Reasonable costs for meals while on a business trip can be claimed. This includes breakfast, lunch, and dinner, but be mindful of what HMRC considers “reasonable.” Lavish meals or alcohol may not be covered.
- Accommodation: Hotel stays or other lodging costs are allowable if they are necessary for business purposes. Again, ensure that the accommodation costs are reasonable and appropriate for the nature of the trip.
- Incidental expenses: These can include things like parking fees, tolls, and even laundry costs during an extended business trip. Keep detailed records and receipts to substantiate these claims.
Common mistakes to avoid
Understanding what you can claim is half the battle. The other half is avoiding common mistakes that could lead to rejected claims or, worse, an HMRC investigation.
- Not keeping detailed records: Always keep receipts, invoices, and records of all expenses claimed. This documentation is essential in the event of an HMRC audit.
- Mixing personal and business expenses: Ensure that expenses claimed are strictly for business purposes. Personal expenses, even if incurred during a business trip, should be kept separate and not claimed.
- Failing to justify expenses: Be prepared to explain why certain expenses were necessary for business. This is particularly important for high-cost items or less obvious claims.
- Ignoring mileage logs: If you claim mileage, maintain a detailed log of trips, including dates, destinations, and the purpose of each journey. This log will support your mileage claims and ensure accuracy.
Maximising your claims
To make the most of your travel and subsistence claims, consider these tips:
- Plan ahead: Where possible, plan business trips in advance to take advantage of lower travel and accommodation rates. This can help keep costs reasonable and within what HMRC considers allowable.
- Use technology: Many apps are available that can help track and record expenses in real-time. These tools can save time and ensure you don’t miss any claimable expenses.
- Regular reviews: Periodically review your expenses and claims to ensure compliance with HMRC rules. This can also help identify any areas where you could potentially increase your claims.
According to a report by the Federation of Small Businesses (FSB), 55% of small businesses find managing expenses challenging, with travel and subsistence being the most confusing categories.
Additionally, a study by HMRC highlighted that approximately 20% of expense claims are incorrectly filed, leading to potential fines or rejected claims. Ensuring your claims are accurate and well-documented can save your business both time and money.
Consult a professional
Understanding what travel and subsistence expenses you can claim is crucial for the financial health of your startup or SME. By keeping detailed records, avoiding common mistakes, and maximising your claims, you can ensure that you are compliant with HMRC rules and making the most of allowable deductions.
At Blue Shore, we’re here to help you manage these aspects of running a business and ensure you remain on a solid financial footing.
If you need any assistance with your expense claims, don’t hesitate to get in touch with us.
