If you’re an HR or Personnel Manager based at group head office and responsible for the UK workforce, it might seem logical to apply a standardised, pan-European or pan-group expenses policy across all countries. However, when it comes to the UK, this approach often causes significant tax compliance issues.
At Türner & Co., we specialise in helping multinational groups navigate the unique rules that apply in the UK.
The UK has specific and strict tax rules around what can and cannot be reimbursed tax-free. Unlike some other jurisdictions, the UK does not allow generous round sum (per diem) allowances unless specific criteria are met. If your group is applying a global expenses policy without accounting for these local nuances, your UK business could be exposed to unnecessary tax liabilities, enquiries from the tax authorities, and penalties.
Travel expenses are business costs incurred by employees while performing their job duties. In the UK, there are two criteria that must be fulfilled for a tax-free reimbursement:
Personal travel or commuting to a permanent workplace cannot be reimbursed tax-free.
To learn more about how the UK defines a temporary workplace, visit our Temporary Workplace Rules page.
The UK does allow for tax-free round sum payments known as scale rate payments, but they are very modest compared to other countries.
Benchmark Rates:
| Minimum Journey Time | Maximum Allowance |
|---|---|
| 5 hours | GBP 5 |
| 10 hours | GBP 10 |
| 15 hours + after 8pm | GBP 25 |
A supplementary GBP 10 can be added if the journey extends beyond 8pm. But crucially:
If you want to use higher rates that reflect actual costs, you can apply to HMRC for approval. This requires:
Reimbursing employees outside of the approved framework could result in:
We understand that you’re under pressure to standardise systems across the group. But in the UK, compliance requires localisation.
No, unless you are using HMRC’s approved scale rates and all qualifying conditions are met.
Not without a bespoke agreement with HMRC. The UK rules are more restrictive.
A workplace the employee attends for a limited duration or for a specific task/project. Visit our Temporary Workplace page to learn more.
Yes. Trying to use a pan-European policy could lead to non-compliance in the UK.
Yes, but you need to provide robust data through a formal sampling process.
Get in touch today to discuss your UK employee expense reimbursement policies. We’ll help you create a system that works for your business and keeps you compliant with HMRC rules.
Assistant Manager
Payroll
Senior Manager
Head of Direct Taxes
