Introduction -incidental expenses
Personal Incidental Expenses are an allowance that you may be able to claim for as part of your work for your business. This allowance is also known as PIEs.
The PIEs are similar to a Per Diem rate (which is Latin for per day or each day) or daily allowance. This is a specific amount of money that a business gives an individual, typically an employee, per day to cover their out-of-pocket expenses when travelling on the employer’s business.
When you incur travel expenses as part of your working day and you are working away from home overnight, you may also incur some incidental overnight expenses. PIEs are an allowance that is available to business owners and employees when they stay away from home overnight for work reasons. This could be in respect of a one-off business trip or staying away as part of your general contract work.
As a director who runs your own UK company, you may travel to different locations for business reasons. Therefore, if you stay away from home overnight for work-related reasons, you may incur incidental expenses.
To summarise, when your work involves an overnight stay away from home, you will more than likely incur some incidental expenses and although these expenses are non-business, the PIEs allowance allows covers these. When you can claim for the allowance, it can be part of your overall business expense and this will save your company tax.
Other initial thoughts
The PIEs allowance can often be missed therefore please make sure that you claim for the incidental expenses when you stay away overnight for business. As a side note, another expense that is often missed by contractors is called Trivial Benefits.
Besides your normal travel expenses incurred, you can also claim for the PIEs. Therefore, as part of your expenses paid or reimbursed, please ensure you include any PIEs on your expenses report.
Please have a read of our article covering tax tips for contractors (this is a member only article and you can read it if you sign up as a member)
Personal Incidental Expenses examples -what do they cover
PIEs are an available allowance for your business and examples of such incidental expenses could include:
The rates that are available
There are fixed allowances available when you claim for Personal Incidental Expenses.
You do not have to report or pay anything to HMRC in respect of incidental expenses, if you claim no more than:
- £10 per night in respect of personal incidental expenses for travel outside of the UK when you are contracting abroad
Other things to think about
If any of the overnight expenses that you claim are not exempt, you may have to report the costs to HMRC. In turn, you will need to deduct and pay tax and National Insurance on these.
What you must do
What’s more, for expenses above the £5 or £10 threshold, you must:
- report them on form P11D
- deduct and pay PAYE tax and Class 1 National Insurance through your payroll. Use the full amount that you pay to your employee, not just the amount above the £5 or £10 threshold
Also, when you claim for Personal Incidental Expenses, you do not need to ask for or keep any receipts. As a result, you can claim the fixed rate of £5 or £10 per night. You can claim this for each night that you spend away from home for work-related reasons to cover your incidental expenses.
The 24 month rule
You should also note that you cannot claim for PIEs if you fall foul of the 24 month rule.
Not all contractors are aware of the Personal Incidental Expenses allowance it seems. Therefore, besides claiming for your contractor travel expenses such as accommodation costs, rail fares, mileage etc, you can also claim for the PIEs too when you stay away. This can make a difference, especially if you are staying away from home overnight regularly during the year. Therefore, if you are not yet claiming for PIEs and can do so, please do claim for these in the future.
Link to Contractor Advice UK group on LinkedIn click here