From 6 April 2017, HMRC changed the way that the lorry driver overnight subsistence allowance works (for more detail see HMRC Employment Income Manual document EIM66130. Operators are now required to apply for an Approval Notice to continue paying a driver the Industry Scale Rate. When applying, the operator must indicate the presence of a checking system that they will use on a random basis to ensure the expenses being claimed are compliant with the level of overnight subsistence allowed for a driver.
The Approval Notice is required for operators using the Industry Scale Rate for subsistence, currently £34.90 per night, or £26.20 per night for drivers in a vehicle with a sleeper cab. Any operator who wishes to pay in excess of these amounts on a regular basis will have to apply for a Bespoke Scale Rate Agreement that is specific to their requirements; this would also require confirmation that a checking system is in place.
Both the Bespoke Scale Rate Agreement and Industry Scale Rate Approval Notice may be applied for online here. (We suggest you use IE as your browser to open this link, others may not display.)
The approval will last for up to five years.
Employers will have to undertake a random 10 per cent check of all employees’ expense claims over a one-month period on a six-monthly basis. These checks should cross-reference driver work schedules and time sheets to demonstrate that drivers were away from base in the performance of their duties on the days that payments were made. A further check on driver receipts should be carried out to ensure that costs were incurred.
Further details of the checking model are available from HMRC document EIM30275 which is available here.
The documentary evidence needed to support the checking system may include the following.
- Receipts – eg for hotels or parking
- Drivers’ log sheets or tachograph records/data
- Drivers’ expense claims
Operators may need to make further enquiries to be satisfied that a tax-free payment is justified.
Operators will need to retain evidence to show that they have undertaken checks in accordance with the checking system that they proposed when making their application for an Approval Notice. This evidence may also be required when the employer is subject to an HMRC employer compliance review.