HMRC internal manual

Employment Income Manual

EIM05210 - Employment income: scale rate expenses payments: subsistence expenses: sampling guidance

The guidance on this page applies for the tax years up to and including 2015 to 2016. For tax years 2016 to 2017 onwards, the benchmark scale rates have been revised and are now included within the exemption for amounts which would otherwise be deductible. See EIM30200 onwards.

Subsistence expenses are a common example of expenses which employers choose to reimburse by means of a scale rate payment. Prior to April 2016, they should be requested and agreed as part of a dispensation under section 65 ITEPA 2003 (see EIM30050 onwards). HMRC officers considering such applications need to be satisfied that the proposed scale rate payments are set at a level which broadly represents the amount that their employees are actually spending on allowable subsistence expenses. Employers should therefore be prepared to provide HMRC with evidence of the amount that their employees are spending. Such evidence should ideally be in the form of receipts, but other evidence such as an employee’s contemporaneous record of expenses incurred, should also be considered.

Sampling guidance

HMRC accepts that it will be impractical for some employers to obtain evidence of expenditure incurred by every one of their mobile employees. Where that is the case, we shall accept evidence in the form of a sampling exercise based on the expenses incurred:

  • by a random sample
  • of 10% of the eligible employees
  • for a period of one month

Employers will have to be able to satisfy HMRC that their 10% sample is genuinely a random one - for example, every 10th name from an alphabetical list of the employees concerned. HMRC will accept the evidence produced by such a random sampling exercise as the basis for agreeing the amount of the employer’s scale rate subsistence payment.

For the avoidance of doubt, it is not necessary for all eligible employees to keep evidence of their expenses for a month. Evidence need only be kept by the 10% of employees who are randomly selected to take part in the sampling exercise.

See also expenses to be included and sampling exercise incomplete.

Frequency of sample

If a dispensation is given following a sampling exercise of the kind described above, no further sampling exercise will be necessary - and the dispensation will remain in force - whilst circumstances remain unchanged. Employers who agreed a scale rate within a dispensation in the 5 years preceding 6 April 2016 could continue to use this rate until the expiry of 5 years under the transitional arrangements for the introduction of the exemption for paid or reimbursed expenses. Employers will also need to have a checking system in place to confirm that payments are only made on qualifying occasions.

Effect of this guidance on existing dispensations

From April 2016, it will not be possible to amend a dispensation as the legislation has been repealed. Scale rate payments made after April 2016 will need to be made either at the benchmark rates or under the terms of an approval notice. In both cases, the employer must have a checking system in place to confirm that payments are only made on qualifying occasions.

All dispensations ceased to exist on 6 April 2016.