What is a Per diem?

Per diem is a Latin phrase that means per day or each day referring to per day allowance that an employer provides their employees per day to cover their incidental expenses. Per diem payments typically cover expenses like meal costs, lodge costs, entertainment, and travel expenses while travelling away for business purposes. Since Per diems are intended to cover employee expenses related to the business and not to serve as an additional perk, they are in essence non-taxable, when a company decides to grant a higher per diem than the maximum amount, this will be considered the income of the employee and will become a taxable benefit to employees. In this case, they must be reported in P11D form. Working with per diems instead of actual expenses may be easier for companies, as it eliminates the need for employees to prepare detailed expenses to report with supporting receipts to document amounts spent while travelling on business.

What is per diem allowance and what does it cover?

Per diem allowances are provided as a daily allowance. This is for a full day’s work. A Per diem allowance is a fixed amount paid by the employer to an employee to cover incidental expenses while travelling away for Business purposes. Generally, a per diem allowance covers the meal, travel, and accommodation expenses. There will be a usual set limit for per diem allowance depending upon the employers.

When claiming travel expenses, it should be noted that it needs to be a business-related claim.