UK Tax on 'Per diems'

[Spotless]

Gooday ladies and gents,

Quick question for in particular corporate pilots on day pay / per diems / down route pay. I've started a new role and found out our £75 a day 'pay' is taxed (I'll be just inside the 40% bracket so will see £45). Being in prime hotspots around Europe (NCE, BCN, IBZ etc). Surely this should be tax free, given in cash? Interested to see what other operators do such as NJ/ Vista?

Thanks in advance.

[Journey Man]

Not taxed. Received separately to main salary.

[redsnail]

UK based NJE pilots pay a small amount of tax on their per diems.

[Dan the weegie]

A lot depends on who employs you. Vistajet employ their crew directly and have agreed a flat untaxed rate of £35 daily subsistence allowance with HMRC, you get that in every country when you’re away from home regardless unless the company is covering the cost of your food. I don’t know what other companies do.

If you are working as a contractor you can use the HMRC subsistence allowance and pay yourself tax free up to that amount if you keep a record of where you were and for how long.

https://www.gov.uk/government/publications/scale-rate-expenses-payments-employee-travelling-outside-the-uk

[Down in front]

TAG was untaxed - obviously supposed to be actuals with notional limits of £15 for breakfast, £25 for Lunch, £35 for Dinner and £10 overnight outside the UK.

But dependent on which aircraft/account you were on etc

Crews were randomly selected (although advised beforehand) that they would be audited and would have to provide receipts to go with their claims. All other crews are supposed to retain receipts for 6+ years incase HMRC asked for them.

[OvertHawk]

It depends entirely on what the agreement is between HMRC and your employer. (I'm assuming UK HMRC as your tax authority here).

In some cases it's tax free, in some cases part taxed, in some cases entirely taxed. It depends on what case your employer has made to HMRC about the payment being justifiable / required.

If you're tax free - you're laughing. If you're taxed in full then you can keep receipts for what you've spent and offset thos in full against your tax return.

It gets difficult if part of the p/d is tax free however because then you can only claim back the expenses above the amount that is tax free if you see what I'm getting at - this requires some arithmetic.

If subsisting outside the UK then you don't use reciepts - just use the HMRC figures for specific cities "HMRC Worldwide Subsistence Rates".

Hope that helps

[matkat]

And always remember the £10 per day unreceipted claim whilst overseas and £5 per day whilst in the UK.

[Miles Magister]

The basic rule is that all income is taxed and allowances for meals and necessary expenses are to be paid on submission of receipts for all businesses. In the past each individual airline company struck separate deals with their tax offices to allow a set tax free per diem rate as processing individual claims from all air crew would be a massive burden. This worked well until allegedly a major carrier might have started to offer cabin crew double per diems to go to work on bank holidays and sunny days and not to go sick when it was sunny. The tax man might have got upset and possibly threatened to withdraw all per diem agreements as companies could effectively be paying tax free salaries. So I heard that a big union which is reputed to represent a major carrier sat down round a table with the tax man and the current system was agreed which now applies to all businesses across the UK instead of just airlines. The general rule is that companies can pay employees the rates listed in the link posted above for overseas travel but UK expenses are still paid on receipt. Per Diems are only to cover expected expenses and nothing more. In practice airlines still agree individual deals with their tax inspectors for necessary expenses such as meals and accommodation for all duty travel, in the UK and overseas. Flight pay is not a per diem and flight pay is taxable income. If you are not covered by one of these per diem agreements and you do not get tax free per diems or meal expenses reimbursed from your company you should file a tax return each year and claim the amounts shown in the guidance materiel. You will not get the full amount, just the tax element back. For example if you are in XXX for 24 hrs and your company provides a hotel but not any meals or per diem and the per diem rate published by HMRC is £100 you can claim back the tax on the £100. That would be £40 if you pay 40% tax or £20 if you pay 20% tax. Basically take the total per diem allowance you qualify for over the year and enter it on your tax return as a business expense, this total amount will be taken off of your taxable income amount for the purposes of calculating your tax liability for the year.

[Miles Magister]

Joe,
The FRE and Per Diems are completely separate things. But as you correctly say any airline pilot can the FRE and it is in addition to any other expenses.
Airline Fixed Rate Expenses (https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim50052)

[Dan the weegie]

In the small print of one of the FRE annexes, it says if you receive any tax free expenses, (per diems are tax free expenses) then they should be deducted from the full allowance. It is very clear you can't have all of both. Anyone who does claim both might well destroy the concession for all of us
Not quite, what it says is that if you receive expenses for those - specific and clearly stated - items which the FRE is intended to cover and it explicitly states that those are not travel expenses (per diems), then those expenses should be deducted from your FRE.

The FRE has absolutely nothing to do with per diems at all and so you can relax that you won’t be losing your tax free allowance.