There has long been an acknowledgement by HMRC that drivers who are required to spend nights away from home will incur an expense. In recognition of this there is an ‘overnight allowance’ that employers can pay drivers, which is free of income tax and national insurance. This allowance is currently set at £26.20. The expense is designed to cover the cost of an evening meal, breakfast, washing facilities and upkeep of bedding in the cab.
As of 6th April 2017, HMRC changed its regulations regarding overnight allowances and their ability to be given free of income tax and National Insurance. HMRC are now insistent that an employer can only continue this arrangement if there is a ‘bespoke agreement’ in place.
A ‘bespoke agreement’ will be granted to an employer by HMRC once they can evidence that they are following a new set of regulations.
These regulations will now insist upon random sample checks on drivers who are incurring this expense, which, in simplified terms, means checking receipts. Drivers are required to retain receipts of all costs incurred and random checks of those costs being claimed must be carried out!
During the application process for a ‘bespoke agreement’, the operator must be able to show samples of expenses occurred in either a random sample, 10% of all eligible employees, or over a one month period. Once all evidence has been submitted, HMRC will make their decision on whether to grant the operator a ‘bespoke agreement’ and, if granted, the agreement will be in place for up to five years, subject to compliance reviews.
While this all sounds fairly simple, in practice, many operators are struggling to apply for the agreement with bodies such as The Road Haulage Association describing the changes as “wholly unnecessary” and “ill-judged red tape”.
Do you employ drivers who require an overnight allowance? Are you struggling to apply for the bespoke agreement or unsure whether you are complying with the changes? For legal advice in relation to this agreement please contact Farleys’ transport law department on 0845 287 0939 or submit your enquiry online.