Subsistence is the amount incurred as a consequence of business travel. Typically it relates to accommodation and meal costs incurred. These amounts are allowed because they are associated with the necessary travel. See the Travel expenses guidance note for more information of when travel expenses are allowable.
If an employee qualifies for tax relief for a travel expense, they should also qualify for relief for the subsistence associated with the travel. These rules are different from the general rule for deductibility of expenses, in that the subsistence expense does not need to be incurred ‘wholly and exclusively’. This is because, with any subsistence, there are likely to be elements of mixed or private purpose, eg meals taken on a trip or overnight accommodation because the employee needs sleep. ITEPA 2003, ss 337–339
As a result of the exemption for expenses that are either business expenses or the reimbursement of HMRC-approved amounts, it is incumbent on an employer to keep the necessary processes, systems and controls to ensure that business and non-business expenses can be correctly identified and recorded. ITEPA 2003, s 289A
The tests described below cover both travel and subsistence expenses.
In order for subsistence expenses to be allowable, it must be incurred in association with travel that satisfies one of two tests, either:
- it is ‘necessarily incurred in the performance of duties’ (ITEPA 2003, s 337)
- the travel is ‘for necessary attendance’ (ITEPA 2003, s 338)
Before applying those tests, ensure ‘that the employee is obliged to incur and pay them as the holder of the employment’ under ITEPA 2003, ss 337(1)(a), 338(1)(a). The test is common to both provisions. Commentary and examples on both elements of this test, that it be ‘incurred and paid’ and ‘obliged as holder of the em-ployment’, can be found in the Business expenses ― general rule guidance note.
An amount is allowable subsistence expenditure, if:
- it is incurred in the course of a qualifying journey
- it is spent on meals while at a temporary workplace
- it represents the cost of accommodation and necessary meals where an overnight stay is needed
This follows from the decision in Nolder v Walters. Nolder v Walters 15 TC 380 (subscription sensitive)
HMRC guidance is at EIM31815.