How to set off a business trip against taxes
What is a mileage allowance for business trips and how high is it?
What you need to know: You cannot expect your employee to pay the costs resulting from the business trip himself. If your employee uses his own car for a business trip, you, as the employer, have to assume the costs. That is why it is mandatory to familiarise yourself with mileage allowance for business trips and the correct rules for taxes.
Mileage allowance payments that exceed a certain amount must be reported to HM Revenue and Customs and, consequently, you have to pay tax. Nevertheless, a certain amount of mileage allowance payments per year does not have to be reported. This amount is called the “approved amount” and is calculated as follows:
If the mileage allowance can be counted towards business trips, the amount of business expenses to be deducted is calculated by estimating a lump sum per every mile driven with a vehicle. This lump sum depends on the type of vehicle your employee uses. For cars and vans it is 45p for the first 10,000 miles and 25p for every mile above 10,000 miles. All you need to do is multiplying your employee’s business travel miles for the year by the rate per mile for his vehicle.
You can find information about the current rates on the website of HM Revenue and Customs.
When & how are business trips to be gathered for the business mileage allowance?
It’s important to note that tax authorities can ask for verification if a trip was conducted for business reasons. Therefore, it is important to document travel time and route carefully and to keepcorresponding receipts like hotel bookings, petrol receipts, e-mail correspondence or other relevant documents.
The employee who is travelling is also responsible for documenting the trip. In case an employee hands in insufficient travel receipts, you can deny reimbursement of travel expenses for the business trip.
How should employees document their trips and travel expenses for business trips?
Does the mileage allowance for business trips also apply to planes, trains, etc.?
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