HMRC have introduced an advisory system of benchmark scale rates which employers can use to make subsistence payments to employees who incur allowable business travel expenses free of tax and National Insurance contributions. The new advisory system will be implemented from 6 April 2009.

The advisory system only covers benchmark scale rates for day subsistence payments. If an employer wishes to pay subsistence to employees who have to stay overnight they can either reimburse the actual cost incurred by the employee or agree a tailored scale rate to cover meals and other expenses in a dispensation with HMRC.

Under the current rules an employer is required to notify HMRC of all expenses paid to an employee, even where those expenses would be allowable, unless they have a dispensation.

From 6 April 2009, employers will be able to make tax and NIC free subsistence payments up to the advisory rates without agreeing them with HMRC as long as the employee has incurred subsistence expenses while travelling on an allowable business journey. Employers wishing to use the benchmark scale rates for subsistence payments will simply need to notify HMRC of their intention by ticking the appropriate statement/box on form P11DX before starting to use the system.

Full details of the rates and how the new arrangement works are available in Revenue & Customs Brief 24/09, at http://www.hmrc.gov.uk/briefs/income-tax/brief2409.htm