Meal allowances from 6 April 2016 - EY

1 February 2016 Employment Tax AlertFurther informationFor further information onthe issues raised here or todiscuss employment taxmore generally, pleasecontact one of the followingor your usual EY contact:John 44 20 7951 4654 Nicola 44 20 7951 7198 Robert 44 20 7951 4160 Meal allowancesfrom 6 April 2016An update for umbrellaemployersBackgroundThe way in which umbrella employers pay salary and expenses to theiremployees is undergoing significant upheaval as the rules around traveland subsistence change this will be some umbrella workers who will still be able to claim a taxdeduction for their travel and subsistence expenses after 5 April ( ,because they are not subject to supervision, direction or control, or theright thereof as to the manner in which they work) and some umbrellaemployers may amend contractual arrangements to enable thoseexpenses to be paid without operation of PAYE and NIC.

2 However,employers need to be aware that HMRC s approved scale rates forsubsistence ( , meal allowances ) are being placed onto a statutoryfooting and there are some benchmark subsistence rates up to 5 April 2016 HMRC s current scale rates for subsistence have been in placeunchanged since April 2009 and are as follows:MealMaximum rateBreakfast 5 One meal (5 hour) rate 5 Two meal (10 hour) rate 10 Late evening meal rate 15 Meal allowances from 6 April 20162 Breakfast rates are payable only where the employee leaves home earlier than usual and before evening meal rates are only payable where the employee has to work later than usual and finishes workafter pm having worked his/her normal day. Further, scale rate payments are limited to three meal rateson anyone day or 24 hour rules from 6 April 2016 New regulations will apply from 6 April 2016 to put subsistence scale rates onto a statutory footing.

3 Theregulations set out the rates that employers can use to reimburse subsistence expenses where specifiedconditions are met. Prior approval to use the rates is not needed from HMRC, although employers will still needto have a checking process in place and be able to demonstrate that a tax deduction is allowable under thetravel and subsistence rule. This will include sample testing of receipts as under the current new rates are:Minimum journey timeMaximum meal allowance5 hours 510 hours 1015 hours 25 Where the 5 or 10 allowances are paid, a further allowance may be paid of up to 10 where a qualifyingjourney lasts beyond main changes from the current rules are to remove the breakfast and late evening meal rates and toreplace them with the 15 hour plus rate and the additional allowance for journeys lasting beyond qualifying conditions to be met are: The travel must be in the performance of an employee s duties or to a temporary workplace, on a journeythat is not substantially ordinary commuting.

4 Note that for an umbrella employee this will includeconsideration of the new rules around supervision, direction or control from 6 April 2016 ; The employee must be absent from his normal place of work or home for a continuous period in excessof 5 or 10 hours; The employee must incur a cost on a meal ( , food and drink) after starting the for umbrella employersUmbrella employers who intend to reimburse subsistence expenses to employees after 5 April are advised toreview and update their expenses policies and processes to reflect the new rules. Staff responsible for auditingemployee claims should also be informed of the allowances from 6 April 20163EY Assurance Tax Transactions AdvisoryAbout EYEY is a global leader in assurance, tax,transaction and advisory services.

5 The insightsand quality services we deliver help build trustand confidence in the capital markets and ineconomies the world over. We developoutstanding leaders who team to deliver on ourpromises to all of our stakeholders. In so doing,we play a critical role in building a betterworking world for our people, for our clientsand for our refers to the global organization and mayrefer to one or more of the member firms ofErnst & Young Global Limited, each of which isa separate legal entity. Ernst & Young GlobalLimited, a UK company limited by guarantee,does not provide services to clients. For moreinformation about our organization, pleasevisit & Young LLPThe UK firm Ernst & Young LLP is a limited liability partnership registered inEngland and Wales with registered number OC300001 and is a memberfirm of Ernst & Young Global & Young LLP, 1 More London Place, London, SE1 2AF.

6 2016 Ernst & Young LLP. Published in the Rights NoneIn line with EY s commitment to minimise its impact on theenvironment, this document has been printed on paper witha high recycled in this publication is intended to provide only a general outlineof the subjects covered. It should neither be regarded as comprehensivenor sufficient for making decisions, nor should it be used in place ofprofessional advice. Ernst & Young LLP accepts no responsibility for anyloss arising from any action taken or not taken by anyone using EY can helpWe can help you to understand how the this new legislation will affectyour business and interacts with changes to your business model whichyou are likely to be making in response to the wider changes to the traveland subsistence rules for temporary workers.

7 We can help you toimplement processes and procedures to help you to comply with all ofthis new legislation and to manage tax and reputational risk. Our workcan be tailored to suit the specific needs of your business.