Umbrella Company Expense Dispensations

14 April 2009

From 6th April 2009 HMRC have announced that all Umbrella Companies will be able to offer scale rate dispensations for various types of expenses.

Historically an Umbrella Company would have to apply for a dispensation and it was very hit and miss if your local tax office would allow one and if they did at what rate. Applications had to be supported with a random selection of receipts previously paid out on.

The full article is available on the HMRC website:

HMRC Scale Rate Dispensations

Even with Scale Rate dispensations it will still be best practice to send in your receipts to verify that you have incurred expenses you're claiming for. A good Umbrella will store these for 7 years to ensure you cannot be accused of any false claims.

These scale rates will be available to any employer and are applied for by ticking the appropriate box on form P11 XD.

In detail the HMRC lists the rates available as:

Breakfast rate (irregular early starters only) - A rate of up to £5.00 may be paid where a worker leaves home earlier than usual and before 6.00 am and incurs a cost on breakfast taken away from his home. If the employee regularly leaves home before 6.00 am because, for example, he works an early shift he would not be entitled to use the breakfast benchmark scale rate.

One meal rate (Five hour rate) - A rate of up to £5.00 may be paid where the worker has been away from his home/normal place of work for a period of at least five hours and has incurred a cost on a meal.

Two meal rate (Ten hour rate) - A rate of up to £10.00 may be paid where the worker has been away from his home/normal place of work for a period of at least ten hours and has incurred a cost on a meal or meals.

Late evening meal rate (irregular late finishers only) - A rate of up to £15.00 may be paid where the employee has to work later than usual, finishes work after 8.00 pm having worked his normal day and has to buy a meal which he would usually have at home.

If the employee is paid an allowance under the five or ten hour rule, the late meal allowance could still be paid if he finishes work after 8.00 pm and buys a meal that he would usually have at home. However, if the employee regularly finishes work late because, for example, he normally works the afternoon or evening shift, he would not be entitled to use the late evening meal rate.

Qualifying conditions

Benchmark scale rates must only be used where all the qualifying conditions are met. The qualifying conditions are:

• the travel must be in the performance of an employee’s duties or to a temporary place of work

• the employee should be absent from his normal place of work or home for a continuous period in excess of five hours or ten hours

• the employee should have incurred a cost on a meal (food and drink) after starting the journey

Early starter and late finisher rates

The early starter and late finisher rates are for use in exceptional circumstances only and not intended for employees with regular early or late work patterns.

Tax and NICs free scale rate payments must be limited to three meal rates in one day (or 24 hour period). A meal is defined as a combination of food and drink.

Where employees are required to start early or finish late on a regular basis, the over five hours or over ten hours rates could be paid provided all the other qualifying rules are satisfied.

For detailed advice on expenses please call our Free Phone Helpline on 0800 121 6513.