MAKE YOUR FREE Expense Policy
What we'll cover
What is an Expense Policy?
When should I use an Expense Policy?
Use this Expense Policy:
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if you cover the costs of anything your staff members may purchase that’s associated with their work
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for staff members located in England, Wales, or Scotland
Sample Expense Policy
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EXPENSES POLICY
Statement and Purpose of Policy
- This Policy sets out the approach of (the Employer or we) to Staff expenses and provides guidance on how Staff Members can claim for expenses incurred when undertaking activities on behalf of the Employer. The Policy outlines the process for obtaining expense, which expenses can be claimed for, and any limits on how much can be claimed for certain expenses.
- This Policy applies to all Staff Members irrespective of seniority, tenure, and working hours, including all directors and officers, casual or agency staff, trainees, interns, fixed-term staff, volunteers, workers, and contractors (Staff or Staff Members or you). If an exception applies to any Staff Member this will be set out in their employment contract.
- This policy does not form part of any employment contract and the Employer retains the right to amend it at any time, at our absolute discretion.
Roles and Definitions
- Ultimate responsibility for assessing and processing expense claims lies with . They are responsible for deciding what constitutes a reasonable expense in a given situation and for deciding when any exceptions to this Policy may apply.
- Staff should contact if they have any questions about this Policy or expenses in general or if they wish to discuss an expense they’ve incurred or expect to incur. Staff can contact by email at .
- References throughout this Policy to ‘covering’ or ‘claiming’ expenses refer.
- References throughout this Policy to 'activities' or 'expenses' for ‘business purposes’ refer to those activities or expenses that are undertaken or accumulated for the primary purpose of furthering the Employer’s business in a legitimate fashion. If a Staff Member has any doubt as to whether an activity or anything else is for business purposes, they should discuss this with .
’s Approach to Expenses
- The Employer will cover all reasonable expenses incurred by Staff in accordance with this Policy.
- It is the Employer’s policy to minimise expenses where possible.here possible we will (and we require that our Staff Members) keep expenses to a minimum
Expenses That May Be Covered by
- The Employer will cover reasonable expenses incurred by Staff.
- Which expenses are considered ‘reasonable’ is determined with reference to the details set out below. If a member of Staff has any doubt as to whether an expense is reasonable they should discuss the matter with before incurring the expense (e.g. before booking tickets or purchasing items).
- The amount that can be claimed for any expenses claimable under this Policy for which limits have not been explicitly set is limited to what considers reasonable for a given expense.
Submitting An Expense Claim
- When claiming expenses, Staff should adhere to the procedure set out below as well as possible. If any issues arise (e.g. if a Staff Member is unable to obtain a receipt with a VAT number for an expense), they should contact to discuss the issue to establish whether an expense may still be claimable.
- .
- To claim for an expense, Staff must
- Wherever possible, Staff should provide evidence of the expense they’ve incurred (or that they expect to incur). If requesting payment in advance of an expense the payment may be approved in the absence of evidence, in which case evidence of the expense must be provided as soon as possible after it’s incurred. Appropriate evidence will usually constitute original receipts, invoices, or similar documents. These should, where relevant, be itemised and should include amounts spent and VAT numbers.
- Payments for successful expense claims will usually be paid to Staff Members via payroll.
- The Employer intends to approve all reasonable expenses that come within the scope of this Policy. We reserve the right to refuse any claim that is outside of the scope of this Policy or which is submitted late, at our discretion. Late claims may exceptionally be approved on a case-by-case basis if good reason is given for their lateness.
- Staff are expected to adhere to any expense limits set out in this Policy. If limits are exceeded, Staff are expected to cover excess costs. However, we acknowledge that sometimes unexpected expenses arise or costs exceed expected amounts due to circumstances outside of Staff Members’ control (e.g. if a flight is cancelled and must be rescheduled). In such circumstances, we will evaluate the situation holistically and, in exceptional circumstances, may approve expense claims for amounts above the limits set out in this Policy.
- Any Staff Member found to have made (or to have attempted to make) a fraudulent claim under this Policy, or who otherwise breaches this Policy, may be subject to disciplinary action.
- The Employer will make all necessary Pay As You Earn (PAYE) deductions for income tax, National Insurance contributions, and any other deductions due on expense payments. For this reason, it’s important that staff provide all of the necessary details when claiming expenses.
Attribution
- This Expenses Policy was created using a document from Rocket Lawyer (https://www.rocketlawyer.com/gb/en).
About Expense Policies
Learn more about making your Expense Policy
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How to make an Expense Policy
Making an Expense Policy online is simple. Just answer a few questions and Rocket Lawyer will build your document for you. When you have all of the details prepared in advance, making your document is a quick and easy process.
To make your Expense Policy you will need the following information:
Employer details and expenses
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What is the employer’s name?
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Who is responsible for expense claims?
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Which categories of expenses can staff claim for?
Travel expenses
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Do you want to detail which travel expenses can be claimed? If so, what rules do you want to include?
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Do you want to set specific limits on travel expenses? If so, what are the travel expenses limits?
Accommodation expenses
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Can staff claim the cost of meals when they're away overnight for work? If so, do you want to set specific limits on these meal costs and, if so, what are the limits?
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Do you want to detail which overnight accommodation costs and related expenses can be claimed? If so, what rules do you want to include?
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Do you want to set specific limits on overnight accommodation costs? If so, what are the overnight accommodation cost limits?
Training expenses
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Do you want to detail which training expenses can be claimed? If so, what rules do you want to include?
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Do you want to set specific limits on training expenses? If so, what are the training expenses limits?
Equipment expenses
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Do you want to detail which IT equipment and device costs can be claimed? If so, what rules do you want to include?
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Do you want to set specific limits on IT equipment and device costs? If so, what are the IT equipment and device costs limits?
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What other types of equipment can employees claim for?
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Do you want to set specific limits on equipment costs? If so, what are the equipment expenses limits?
Subscription and membership expenses
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Do you want to detail which subscription and membership fees can be claimed? If so, what rules do you want to include?
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Do you want to set specific limits on subscription and membership fees? If so, what are the subscription and membership fee limits?
Meal allowances
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Do you want to detail which meal costs can be claimed? If so, what rules do you want to include?
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Do you want to set specific limits on meal costs? If so, what are the meal cost limits?
Entertaining expenses
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Do you have an Anti-bribery policy in place? Is it available online?
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Do you want to detail which entertaining costs can be claimed? If so, what rules do you want to include?
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Do you want to set specific limits on entertaining costs? If so, what are the entertaining expense limits?
Other expenses
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What other categories of expenses will you cover?
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Do you want to set limits for each category of expenses? If so, what limits are in place?
Reimbursement
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Will staff be paid back (ie reimbursed) for expenses after they've been incurred and/or paid in advance for expenses that they plan to incur?
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To claim expenses, should staff:
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Submit a claim in writing after incurring an expense?
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Submit a claim via an online expense claims platform? What is the name of the platform?
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Submit a claim using an expenses claim form after incurring an expense? Is the expense claim form available online?
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Using a different method?
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Non-compliance
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Is a Disciplinary policy or procedure in place and, if so, is it available online?
Other points
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Do you want to set out how staff are expected to reduce expenses? If so, how should staff reduce expenses?
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Do you want to include a commitment to environmental sustainability in your Policy?
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Common terms in an Expense Policy
An Expense Policy communicates an organisation’s approach to staff expenses, so that staff can make expense claims in a clear and compliant way. As a result, this Expense Policy template covers:
Statement and purpose of the Policy
This section provides an overview of the Expense Policy and sets out why it is important for the employer and to whom it applies. It also clarifies that the Policy is non-contractual and can, therefore, be amended by the employer when necessary.
Roles and definitions
This section identifies who is responsible for assessing and processing expense claims. This is also the person who staff members should contact if they have any questions about claiming expenses.
This section also clarifies what certain terms used throughout the Policy (eg ‘covering’ or ‘claiming’ expenses) mean. This ensures that everyone reading the Policy understands what it means.
The employer’s approach to expenses
This section explains that the employer will cover all reasonable expenses incurred by staff members in accordance with this Policy. It also encourages staff members to minimise expenses where possible. Where relevant, it also includes a commitment to environmental sustainability and encourages staff members to select the most environmentally friendly options when incurring expenses.
Expenses that may be covered by the employer
This section sets out the expenses that are covered by the employer. For each category of expenses, this section provides details on what is considered reasonable and, where relevant, will provide expense limits.
Submitting an expense claim
This section details how staff members should claim for expenses they incur. It also explains how payment for expenses will be issued by the employer and within what time period it should be received by staff members.
You can edit your document if you want your Expense Policy to include further or more detailed provisions. However, if you do this, you may want a lawyer to review or change the Expense Policy for you, to make sure it complies with all relevant laws and meets your specific needs. Ask a lawyer for assistance.
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Legal tips for making an Expense Policy
Make sure you comply with your tax, National Insurance, and reporting obligations when covering staff expenses
Employers must pay tax and National Insurance contributions on certain categories and types of staff expenses. Similarly, they must keep and submit records on certain categories and types of staff expenses. Some categories of expenses are exempt from these requirements. It’s important to follow these requirements. Paying out expenses using payroll can help you to do this. For more information, read Employee expenses and benefits.
Understand when to seek advice from a lawyer
If you’re unsure about how to understand and follow your Expense Policy, it’s a good idea to Ask a lawyer for assistance. Also consider asking for advice if:
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you need assistance complying with tax and recording requirements
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you’re concerned you may be breaking anti-bribery laws with entertaining expenses
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you’re covering expenses for staff members based outside of England, Wales, and Scotland
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Expense Policy FAQs
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What is included in an Expense Policy?
This Expense Policy template covers:
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who is responsible for making decisions about expenses, processing and approving expenses claims, and answering questions about expenses
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the employer’s approach to expenses, including optional sections on:
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how staff are expected to reduce costs
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the employer’s commitment to environmental sustainability
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which categories of expenses the employer will cover, including:
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details about each category of expenses covered
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limits for particular expenses, and
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if you cover entertaining expenses, information about compliance with anti-bribery laws
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how staff should submit expense claims
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what happens if a staff member abuses the provisions of your Expense Policy
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Do I need an Expense Policy?
There’s no legal requirement for employers to have an Expense Policy in place. However, managing staff expenses can be difficult as there are various tax and reporting requirements that you must keep on top of. Having an Expense Policy in place can help you to manage these requirements whilst communicating clearly with your staff about what expenses they can claim.
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What’s the difference between staff expenses and benefits?
Staff (or employee) expenses are sometimes referred to as staff (or employee) benefits. Both are essentially the same thing for the purposes of reporting and paying tax on these payments. This Expense Policy treats expenses and benefits the same and simply refers to ‘expenses’.
For more information on expenses, read Employee expenses and benefits.
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What sort of expenses should I cover?
As an employer, it’s almost entirely up to you what kinds of staff expenses you’ll pay for. Some (but by no means all) of the categories of expenses you may choose to include in your Expense Policy are:
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travel costs (eg travel tickets, congestion charge costs, and parking costs)
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meal costs
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accommodation costs and other costs associated with being away from home for work
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the costs of training courses
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equipment costs (eg costs of IT equipment and devices required for working from home)
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subscription and membership fees (eg for subscriptions to online databases)
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clothing or personal protective equipment (PPE) costs
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counselling costs
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medical or dental costs
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entertaining costs (ie the costs of entertainment, such as dinners, for current or potential clients, partners, or collaborators)
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What do anti-bribery laws mean for entertaining expenses?
Entertaining expenses are costs incurred for the purposes of maintaining or developing a business relationship with potential or existing clients, partners, or collaborators.
You must be aware of anti-bribery laws if you cover entertaining expenses, as there is a risk that any entertainment your business offers (eg nice dinners or outings) could be considered bribery (ie illegally incentivising people to do business with you). The general principle to abide by when deciding which entertaining expenses are honest and legal is that expenses should be reasonable, proportionate to purpose, and incurred in good faith. They should be connected to a legitimate business activity (eg discussing a collaboration agreement) and should be no more lavish than needed. If you indicate that you cover entertaining expenses, this Expense Policy will include a clause explaining these anti-bribery law considerations.
You can make an Anti-bribery policy to set out in more detail how your business avoids engaging in bribery. For more information, read Workplace anti-bribery rules.
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Do I have to record and pay tax on staff expenses?
You will have to pay tax and National Insurance contributions (NICs) on some types of staff expenses. Similarly, you must keep records of some types of expenses and make reports to HMRC. There are specific rules for different categories of expenses. Some categories have exemptions. If an exemption applies to a particular type of expense you generally won’t need to pay tax on expenses within that category.
Exemptions are sometimes available when expenses within a particular category are kept below a certain level (eg £5 per night for incidental overnight expenses incurred during travel within the UK). It is, therefore, a good idea to check any exemptions available when you’re setting limits on expenses in your Expense Policy.
The UK Government provides guidance on tax and reporting requirements for different categories of expenses and on how to report, pay tax on, and record your staff expenses.
For more information, read Employee expenses and benefits.
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How should I provide money for expense claims?
You should generally pay staff money following successful expense claims via payroll. This creates a record of your payments and ensures that you’re always being clear and transparent about your staff expenses payments.
You can also use payroll to pay taxes and NICs due on your expense payments. This is known as ‘payrolling’. To use this method, you’ll need to register to do so with HMRC before the start of the tax year.
For more information, read Employee expenses and benefits and the Government’s guidance on payrolling.
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What if a staff member spends more than they should on an expense?
The appropriate way to handle overspending on expenses depends on the situation. Sometimes, if there’s a good reason for additional costs being incurred, the best thing for an employer to do is to cover the additional expense. Staff members may have expenses that they must incur in order to perform their jobs. If such expenses go over expenses limits for a good reason (eg because a flight was cancelled and a staff member had to find last-minute accommodation) it’s often fair to the staff member to cover additional costs.
This Expense Policy template includes a clause stating that expense claims in such instances will be dealt with on a case-by-case basis and that the employer has discretion to approve them or not. This allows you to be a compassionate employer, whilst also allowing you to refuse any requests that you believe are truly unreasonable.
If you believe that a staff member is abusing their entitlements under your Expense Policy you can take disciplinary action against them. You should follow a Disciplinary procedure to help you follow employment laws when carrying out any disciplinary proceedings.
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