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Business Matters - May 09 - Expenses

With all the furore in the media this week about MP’s expenses we would like to take this opportunity to focus on the subject of expenses; the value of having a policy, what it should contain, violations of policy and enforcement.

The value of having an expenses policy

Many organisations have a policy in place describing what constitutes an acceptable business expense, but the formality of the policy and its interpretation is often vague. Setting out in writing, in a centrally accessible document, the details of what can be claimed as reasonable business expenses is invaluable when it comes to managing employee expectations, cash flow and minimising costs.

What to put into an expenses policy

What is acceptable will vary depending on your business and depending on the role that individuals perform. However, as an overview we have listed below some areas that we recommend are covered within a good expenses policy:

1. Who can claim

You may allow everyone in your organisation the discretion to make expenditure on behalf of the business and then claim it back, but be sure to include in an expenses policy the instances in which claims may be submitted, and the fact that permission should be gained prior to spending money on anything which an individual would expect recompense for.

2. Timescale

When must expenses be claimed by? It is sensible to give a timeframe in which expenses must be claimed, i.e. within 2 months of the expenditure.

3. Evidence

It is a good idea to spell out what you will require in order to reimburse an expense, e.g. a VAT receipt with details of the purchase. For taxis etc, you may want to advise staff that they should write the details of the journey on the back of the receipt.

4. Travel

Spell out clearly which modes of transport you endorse your staff using and, if public transport, which class; i.e. no first class travel on trains and planes.
Also remember to set out what level of fuel allowance you will reimburse, bearing in mind that the maximum permitted by the HMRC (tax free) is 40p per mile for up to 10,000 miles and 25p thereafter.
It is important to note what will be counted in terms of this allowance and employees must be advised that any travel to and from their normal place of work cannot be claimed for under HMRC rules. It is a good idea to set out how mileage should be calculated too, e.g. by using Google Maps, AA Route Planner etc.

5. Personal incident expenditure

This refers to newspapers, toothbrushes, etc when an individual is required to stay away from home for work purposes. HMRC allow up to £5 a night, or £10 if the trip is overseas.

6. Foreign currency expenditure

If staff are travelling oversees the employers should indicate how the exchange rate will be calculated and what evidence is required, if any on the method used.

7. Entertaining

Which expenses for entertaining will be reimbursed, i.e. only when a third party is present and what conditions need to be satisfied when making a claim.

8. Telephones/home office expenses

If employees are working from home, you may want to include a section on what expenses may be claimed. Consider also those who work from home in emergencies (e.g. snow or business closure situations) as well as those who work from home on a regular basis. Expectations should be set out in terms of calling/using personal mobile phones, etc.

9. Violations and enforcement

In terms of enforcing the policy, it is important to apply the rules consistently and monitor them for infringements. Make it clear, in the expenses policy and in the disciplinary policy, the sanctions that may be imposed on anyone breaching the policy and how seriously it will be taken.

If you would like any help drafting, or reviewing an expenses policy, or any other type of policy then please do give us a call on 0141 776 6456, alternatively please use the contact form.

25 June 2009, Administrator