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Subsistence allowances to lorry drivers

Subsistence allowances to lorry drivers

HMRC introduces new conditions to allow lorry drivers continued income tax exemption.


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Subsistence allowances to lorry drivers - truck on a long road

The new guidance can be found in the Employment Income Manual at EIM66105. In particular, this guidance includes two new conditions (Condition A and Condition B) which HMRC state must be met for the payment to be exempt from tax. i.e.

  1. The employer operates a checking system to ensure that the employee is in fact incurring and paying an amount in respect of the expense.
  2. There is no knowledge or suspicion that the employee has not incurred an amount in respect of the expense and the expenses is in respect of a qualifying business journey.

Key changes

Provided the employer was satisfied that the driver was away from his normal base and therefore sleeping in his cab. HMRC’s previous view was that this was enough information to trigger a tax-free Scale Rate subsistence allowance. HMRC now requires employers to obtain proof of purchases from drivers as a pre-condition for the payment of overnight subsistence allowances. This is part of the requirement to have Checking Systems in place to govern the payment of Scale Rate allowances.


The new guidance took effect on 6 April 2017.

Our view

Our concern is that many employers will be unaware of these changes and its impact. There is a risk that many will continue to pay subsistence allowances as they previously did, unaware HMRC may claim that they have not met the conditions and are therefore subject to tax/NIC and penalties.
This will add to the administrative burden on both the employer and the driver.

A key area for employers to consider is how to communicate the changes to staff and other stakeholders (e.g. Unions). One can imagine that drivers will be concerned that previously provided tax-free contractual payments will now be subject to PAYE/NIC. Consideration will therefore need to be given as to whether to continue with such payments, and if so whether to apply PAYE or settle tax separately with HMRC. A process and control framework will also need to be introduced to manage such payments going forward.

Please do not hesitate to get in touch with your normal contact or e-mail :


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