Subsistence

This Overheads code records the cost of subsistence incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Construction (site-based labour)

A site team working away from their permanent workplace claims HMRC's benchmark scale rate rather than submitting receipts — say the 10-hour rate of £10 each for four workers, £40 in total. Because this is a round-sum allowance rather than a receipted purchase, there's no VAT invoice behind it: the entry is simply a debit of £40 to 7406 (Subsistence) and a credit of £40 to bank, with nothing posted to 2201 (Purchase Tax Control Account).

Professional services

A consultant visiting a client site submits an actual receipted expense claim for lunch and dinner, £96 (£80 net of VAT). Because this is a genuine business cost rather than client entertaining, the VAT is reclaimable in the normal way: a debit of £80 to 7406, a debit of £16 to 2201, and a credit of £96 to bank once the claim is reimbursed.

Plenty of businesses barely touch this code at all — retail and hospitality staff working on their own premises rarely have a business reason to claim subsistence, so it tends to appear only for the odd offsite training day.

Commonly confused with

Because code 7405 (Overseas Travelling) sits right next to this one in Overheads, it's a common mis-posting target. Code 7406 is specifically for subsistence, while 7405 covers overseas travelling — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Subsistence won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads