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HMRC internal manual

Employment Income Manual

Tax treatment of lorry drivers: subsistence allowances paid to lorry drivers

From 6 April 2017, employers paying or reimbursing subsistence allowances to lorry drivers need to do so within the exemption for paid or reimbursed expenses (See EIM30200).

Sections 289A and 289B ITEPA 2003

Subsistence allowances paid by an employer, or a third party, to a lorry driver will be exempt from tax if paid or reimbursed in an approved way and both of the following conditions are met: EIM30220.

Condition A

The payer, or another person, operates system for checking that the employees are in fact incurring and paying amounts in respect of expenses of the same kind and that a fully matching deduction would be allowed under Chapters 2 or 5 of Part 5 ITEPA in respect of those amounts.

Condition B

Neither the payer nor any other person operating the system for checking knows or suspects, or could reasonably be expected to know or suspect, that the employee had not incurred an amount in respect of the expense, or that a deduction under Chapters 2 or 5 of Part5 ITEPA would not be allowed in respect of those amounts. 

Approved way

A scale rate expense is paid in an approved way if it is either calculated and paid or reimbursed in accordance with the regulations on benchmark rates (See EIM30240), or it is calculated and paid or reimbursed at a bespoke rate in accordance with an approval notice given under section 289B ITEPA 2003.EIM30260)

Salary sacrifice

The legislation at S289A also prevents payment or reimbursement of subsistence expenses under a salary sacrifice arrangement EIM30230

In order for a fully matching deduction in respect of the expense to be due under Chapters 2 or 5 of Part 5 ITEPA the expense must be no more than a reasonable reimbursement to cover the cost of accommodation and subsistence

  • incurred on travelling in the performance of the duties of the drivers employment, or
  • necessarily attributable to the drivers attendance at a workplace in the performance of their duties, and not an expense of ordinary commuting.

EIM32015 explains what is meant by a business journey where the travel is to a temporary workplace.

EIM32350 explains what is meant by a business journey where the travel is in the performance of the duties of the employment.

Overnight allowances in the UK

In addition to the benchmark scale rates for subsistence expenses, HMRC has agreed a reasonable amount employers can pay to lorry drivers for nights away in the United Kingdom provided the employer has a checking system in place. Although this is a bespoke rate (see EIM30250), amounts up to this level can be paid under the terms of an approval notice without an employer needing to undertake a sampling exercise. The rate has been agreed as a standard industry rate EIM30255.  

When applying for the approval notice in respect of a standard industry rate, employers will need to confirm they have a checking system in place and provide examples of the checks they will be making (See EIM30270). Suggested models for checking systems can be found at EIM30275.

For documentary evidence required to support a checking system see EIM66120.

To apply for an approval notice, employers can complete the form at: LC Forms

The approval notice lasts for a period of up to 5 years.

The standard industry rates are listed at EIM66110

For lorry drivers using a sleeper cab – see EIM66130.