The management of Employee Expenses should be a relatively straightforward matter with little scope for misunderstandings or errors. Unfortunately, for many organisations this proves not to be the case and the consequences can be costly.
The costs to organisations that do not properly manage their employee expenses can be substantial as the tax authorities will inevitably seek repayment from the company rather than the employee (sometimes both).
- In some cases up to 7 years of unpaid tax and interest can be recovered.
- If inaccurate records are kept, then HMRC may make an extrapolated estimate based on the tax situation of a small number of sampled employees.
- An incorrectly completed P11D can result in a substantial fine.
Employers must ensure that adequate expense records are kept and all employees must be required to complete and submit accurate records as part of their regular expense claims process. No expenses should be paid unless a detailed justification can be provided.
It is particularly important that there is stringent management of claims relating to home based Employees. These employees cannot normally claim any expenses involving a journey from home to work even if that journey involves a visit to a client. Only any additional expenses incurred as a result of the business visit can be claimed.
However in recent years the rules relating to Home Workers have been changed and expenses can sometimes be claimed for business travel originating from home (but not for travel to work from home). We would recommend that professional advice is sought on this matter because in order to be allowable, there is a requirement for the employee to carry out substantive duties at their home address (ie not just occasional working from home on a Friday afternoon).
To ensure that no problems arise in future audits, employers should ensure that every employee has a clear definition of their responsibilities and most importantly their permanent place of work.
A robust expense management solution such as [email protected] should be put in place to ensure that the recording, approval and payment of expenses is managed correctly.
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“Organisations that automate their expense claim process
reduce out of policy expenses by 40%
and reduce reimbursement cycle times by two thirds”
– The Aberdeen Group