Nights Away Money Paid to Lorry Drivers

For many years lorry drivers have benefited from nights away money being paid to them tax free as long as the payments were in accordance with the agreed rates.  From 6 April 2017 there have been changes to this guidance which all haulage businesses should be aware of.

The Essential Information

Can I still pay my drivers nights away money?
Yes. Payments for nights away can still be made to your drivers and these payments can still be made free of income tax and National Insurance if you have an agreement in place that has been approved by HM Revenue and Customs (HMRC).

Payments

How much can I pay for nights away?
From 6 April 2017, where the employer is satisfied that the employee incurred expenses as a result of a night spent away from home or their permanent workplace, then payment of 75% of the allowable figure, which is currently £34.90 per night, can be made. This gives a payment of £26.20 per night. This amount is to reimburse the expense incurred when the driver uses their sleeper cab overnight and should cover the cost of an evening meal, breakfast, washing facilities and upkeep of bedding in the sleeper cab.

If you pay your drivers more than the agreed rates then these payments will be subject to income tax and National Insurance as earnings from employment.

What do I need to do to be able to pay these amounts tax free? 

1. Obtain agreement from HMRC
2. Ensure that the drivers retain receipts of the costs they have incurred when they are claiming the nights away money
3. Operate a system where checks are carried out on the expenses incurred

Checking Expenses

What checks do I need to carry out on the expenses incurred?
When you have an agreement in place with HMRC to pay the nights away money tax free, they expect a process to be in place for checking evidence that the drivers have actually incurred the expenditure.

Drivers must ensure they maintain documentary evidence to support the nights away and a checking system for this could include:

• Receipts
• Driver log sheets
• Driver expense claims
• Receipt for staying in a hotel
• Parking receipts and records kept by the employer as evidence of nights away
• Tachograph records may also be able to demonstrate conclusively that the driver was where he said he was

Drivers must maintain the receipts for the costs which they incur and the employer needs to have a process for checking these.  The checking process should ensure that:

• The employees were away from their normal place of work or home
• Claims are being independently checked and authorised
• Claims are being vouched by reference to employee diaries, work schedules and timesheets
• Receipts are being checked to make sure employees have actually incurred qualifying expenditure while working away
• Examination of a minimum of 10% of the claims in each expense period which would usually be each month
• A different selection of drivers claims are checked each month

What if a driver does not provide evidence to support the expenses?
You should advise the driver that they have not provided sufficient evidence to show that they have incurred expenses and carry out a subsequent review to see if they are then complying.  If they continue to fail to provide adequate evidence then HMRC would expect them to be no longer eligible to receive the payment free of tax and National Insurance.

HMRC

How do I get HMRC approval to pay the amounts tax free?
You need to obtain agreement from HMRC in the form of a bespoke agreement to pay the nights away money tax free, you will need to confirm that you have a process in place for checking the expenses.

You can apply for agreement by writing to HMRC at either your local office or:

National Insurance Contributions and Employers Office, HM Revenue and Customs, BX9 1BX

Or by going to this website

You will need to:

• Quote your employer tax reference
• Make it clear that you are seeking an agreement for the agreed sleeper cab/overnight allowance (nights out money)
• Confirm that your employees are required to retain evidence of the expenditure incurred
• Confirm that you will carry out checks on the evidence of the expenditure incurred.

Once you have an agreement with HMRC this will remain in place for a period of up to 5 years.

Do I need to complete a P11d Expenses and Benefits form?
Nights away money paid to lorry drivers does not need to be included on form P11d Expenses and Benefits and any dispensation previously in place will now be replaced by obtaining the required agreement from HMRC.

Many thanks to David Allen for this information.