Per diems: Expenses and taxes in UK

April 15, 2005 3:50 PM

Hi all, I'm a senior technical project manager with specialist expertise in a vertical market inside the insurance sector, about to take on a 8-9 month project in Bristol but will be based (i.e. return twice a week ) in London. I'm a fulltime employee. What would be a sensible per-diem or equivalent package to ask for?

The company is a young one, going places, and is fumbling a bit with the options. Time is my currency more than price. Here are some options explored:

- take a lump sum of cash instead. This of course would be taxable right? They're not sure on this (as I said, a young company). I'm wary of leaving the company and then the IRD hunting me down like the dog I am 2 years later with a mult-thousand-£ bill. So I have to watch my back.

- get a company credit card with an agreed limit, and live off that, including paying rent and everything, then it'd not be considered part of my salary

- select some accomodation (I'm looking at 1-2brm apt or house which would probably go for around £850pcm), get the company to pay for that, and expense travel and other misc costs.

Anyone had any creative ways of compensating for being away from home/girlfriend etc?

thanks!

posted by kiwi.es to work & money (4 comments total)

Firstly, the per-diem rate should include all your actual expenses as well as an inconvenience factor. Inland Revenue is pretty tight on fringe benefits and you'd probably be legally required to pay tax on anything you couldn't justify as 100% business expense, so even renting of a flat might be tricky, but take some time and speak to an accountant on your expense rather than the company's.

So say your raw expenses are £2000pcm, I'd add at least another £2000 for inconvenience (because I value my home time highly) and then add 33% for the tax you might be charged.

The real issue here is whether you want this to be cost-effective for you or the company. I always believe in taking the money up-front rather than having to justify credit-card expenses or other silliness. And presumably the company is making a good profit on sending you beyond known civilization (i.e. the M25), so you should be getting a fair share of that as part of the per diem.
posted by quiet at 6:08 PM on April 15, 2005

INAA, but I don't believe you have to pay tax on a true per-diem (payment under statutory limits, with the excess "returned"), though I don't think rates are published for international business travel. Regardless, you should be able to write-off travel expenses that are "ordinary and reasonable." It's all in Chapter 13 of Publication 535.
posted by cosmonaught at 6:19 PM on April 15, 2005

Ask for double what you really want; it'll look like you're bargaining.
posted by Item at 8:41 PM on April 15, 2005

This site tracks the UK job market and current rates across various disciplines.

If money is no object for this company you might not have a problem, otherwise at least you'll have some data about prevailing market rates to drive and justify your required rate.

If you're a direct employee (you said fulltime employee) an accountant is probably your best bet to discuss compensation options, particularly with a view towards minimizing taxes.

Otherwise if you're a contractor or can contract I believe that you pay yourself tax free dividends but once again, like all matters where money and especially taxes are involved, it's best to chat with a professional.
posted by Mutant at 1:52 AM on April 16, 2005