For many businesses, employee travel and expenses represent a significant cost. A well-written expenses policy will help you to keep on top of that cost and prevent abuse of expense claims, in a way that is also fair to your staff. It will also allow you to demonstrate to HM Revenue & Customs (HMRC) that you are complying with your legal obligations.

Here are some key areas to consider when creating your expenses policy.

Keep things simple, but flexible

Your policy should state clearly and in detail exactly which expenses can be claimed for mileage and other travel, accommodation, food and drink, client entertainment and so on. If the rules and amounts are simple they are more likely to be remembered, and staff will get used to following them and planning their business trips accordingly.

However, you should incorporate a level of flexibility. Hotels in London can be significantly more expensive than in other parts of the country, for instance, so your policy might include a London weighting to allow for this.

Make it fair to all parties

Clearly, you need to protect your business from extravagant or inappropriate expense claims by staff. But employees also need to be properly reimbursed for the costs they incur while working on your behalf. The aim of a good expenses policy is to ensure that no team member loses out as long as they act reasonably.

Best practice suggests that you should also ensure that the policy is applied universally so that senior managers have to follow similar rules to other staff.

Communicate the policy clearly

The policy should be written up and stored in a place where all staff can access it. It might be advisable to include your senior team members and staff who regularly claim expenses in setting the guidelines and descriptions. Not only will this ensure that everyone understands it and communicates it to their teams, they’re also more likely to buy into the policy.

You should also ensure that the policy is regularly updated to take account of new legislation and the changing nature of costs.

Build efficient processes

Staff can begrudge long delays in having their expenses paid, particularly for significant outlays such as rail fares or hotel bills which could lead to difficulties in their monthly cashflow, so ensure that your financial operation – whatever its size – is able to pay expenses promptly and accurately.

Important! Don’t forget…

VAT receipts – Your business can reclaim VAT on most employee expenses as long as you have properly documented receipts. Make sure your staff provide original or digital (scanned or photographed) receipts for all relevant expenditure.

The Bribery Act – Entertaining clients is not as straightforward as it used to be. Make staff aware that entertainment claims should include a valid business reason and the names and businesses of all attendees, to avoid falling foul of the Bribery Act 2010. Take legal advice if you are unsure.

If you would like specific advice about expenses or help with setting up processes, please contact Sarah Gardener on 01865 292286 or email sarah.gardener@shawgibbs.com.