What are travel expenses?
In a nutshell, a travel expense is any kind of monetary cost incurred from booking and or partaking in travel for business purposes. Since these costs are exempt from tax, it’s very much in the interests of the business to claim them back, as it results in better profits.
Generally speaking, travel expenses fall into two main categories: booking costs, and in-destination spends.
Booking / upfront travel expenses
Airfares or train fares
If an employee needs to travel internationally, or several hundred miles domestically, the first choice when it comes to mode of transport will almost always be a plane. Although these tickets can be bought on the day, the rule of thumb is to book them as far in advance as possible for the best rates - therefore, they’ll typically need to be booked in advance. If an employee needs to travel for a shorter distance, trains are often a better bet and can be a more efficient option.
Depending on your company’s Travel Policy, ensuring the business traveller has appropriate insurance will be either the responsibility of the company or the individual travelling, but whatever the case, it’s classed as an upfront travel expense, as most insurance companies won’t insure travellers once they’re in-destination.
If the travelling employee is scheduled to be away for business for at least one night, a hotel reservation will obviously be necessary, and this is another anticipatory cost to incur.
In-destination / spontaneous travel expenses
All food and drink paid for while away for business travel is technically expensable as a travel cost in the eyes of HMRC. Usually, however, company’s have Travel Policies in place that outline exactly what’s claimable and what’s not (e.g. breakfast, lunch and dinner, miscellaneous non-alcoholic beverages, and a spend-cap for all).
While initial transport needs to be booked in advance, it’s not usually possible to predict the exact minute-to-minute breakdown of a business trip, so things like taxis for short journeys are usually organised and paid for in the moment.
If the purpose of the trip is to build a relationship and perhaps negotiate a deal, it might be necessary to pamper the potential client a bit. Whether this manifests as a meal, a few drinks in a bar, or even a show, this type of travel expense is very much claimable, and as above, there will (or at least should) be a policy in place that dictates limits and caps.
Why are travel expenses important to claim and file correctly?
As mentioned at the top, travel expenses are exempt from tax, so the more you can claim back, the better your profits will be.
We’ve given some basic examples above that’ll cover the bulk of various travel expenses, but we recommend you get fully acquainted with the guidelines set out by HMRC, and ensure all the different types feature in your documented Travel Policy. It’s equally important to make employees themselves - or in other words, the people actually travelling and physically incurring such costs - aware of the details, too, else they might assume things that are claimable aren’t.
When it comes to filing travel expenses properly, the surest way to do this is to have a proper system or platform in place that makes that process as streamlined and simple as possible. This will not only ensure that everything is organised in a way that makes sense to an accountant, but also ensures employees will actually make the effort to claim back.
It’s not uncommon for travel expense claim-back processes to be so hideously complicated, employees simply don’t think it’s worth the effort. While an individual employee might only be £20 out of pocket, if the company has 20,000 employees, who all feel the same way, the company is going to lose a lot of money.
How should I claim back my expenses for travel?
We recommend using a platform or app that has been specifically built to accommodate this process. Examples include HelloFCBT, a platform built by yours truly, where all travel expenses can be managed and claimed. And Sam :], our itinerary management app that allows employees to file expenses there and then, as they occur.
When should I claim back travel expenses?
We always recommend that you claim back travel expenses as soon as the trip is complete. If you put it off (easy to do with any admin-based task, because let’s face it, it’s boring), then you run the serious risk of forgetting. You might suddenly remember again half a year down the line, but by then you’ve probably lost those all important receipts and the like.
Technically, as the law currently stands, businesses must claim back travel expenses within four years of the end of the tax year that the money was spent.
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