Resources

Do you reimburse your employees for expenses incurred while working? Do you want to know the legal requirements when it comes to employee expense reimbursement law in the UK? If so, you’ve come to the right place.

We’ll outline what constitutes an employee expense reimbursement. We’ll also look at the legal framework governing expense reimbursement in the UK. Finally, we’ll provide you with our top recommendations so you can stay HMRC compliant and ensure a smooth reimbursement process. 

What is employee expense reimbursement?

Employee expense reimbursement is a process where you repay your employees for business-related expenses they have personally covered. These expenses can include travel costs, meals, accommodation, or any other out-of-pocket expenses they incur while performing their job duties.  

The process typically involves employees submitting receipts or expense reports, which are then reviewed and approved by your finance team before reimbursement is issued. This method helps make sure that your staff aren’t financially burdened by work-related costs, allowing them to focus on contributing to your business’s success. 

Common types of reimbursable expenses in the UK 

Travel expenses

• Commuting: includes transportation costs such as public transport fares, mileage, parking fees, and tolls. 
• Accommodation: covers hotel stays or other lodging expenses during business trips. 
• Meals: encompasses food and drink expenses incurred during travel or while entertaining clients.

Equipment and supplies

• Office supplies: items such as pens, paper, and other stationery. 
• Equipment: larger items like laptops, printers, and office furniture.

Training and professional development

• Courses and workshops: fees for attending professional courses, workshops, or conferences. 
• Certifications: costs associated with obtaining professional certifications relevant to the job.

Phone and internet bills

• Mobile phone bills: monthly charges for business-related phone usage. 
• Internet costs: fees for home internet if used for remote working. 

Employee expense reimbursement law in the UK 

The legal framework governing employee expense reimbursement in the UK is primarily based on common law principles and statutory provisions. While there isn’t a specific statute dedicated solely to expense reimbursement, various employment laws and tax regulations provide guidance on this matter.

Let’s look at some key legal considerations:

Employment Rights Act 1996

The Employment Rights Act 1996 outlines the basic rights of employees, including the right to be paid for work done and to receive wages that are not below the National Minimum Wage. While it doesn’t explicitly address expense reimbursement, it can still be relevant in certain contexts. For example, when employees incur costs related to their job duties, they may expect reimbursement. This expectation typically applies to reasonable expenses incurred while performing their responsibilities.

Tax legislation

UK tax laws, such as the Income Tax (Earnings and Pensions) Act 2003, provide guidance on the tax treatment of employee expenses. Reimbursed expenses are generally exempt from income tax if they are incurred for business purposes.

Implied term of contract

In many cases, there is an implied term in an employment contract that the employer will reimburse employees for reasonable business expenses incurred on their behalf.

HMRC guidelines on reimbursable expenses

HMRC’s guidelines on reimbursable expenses provide detailed instructions on what constitutes allowable expenses (such as travel and subsistence. HMRC distinguishes between business expenses and personal expenses to ensure only legitimate business expenses are reimbursed without tax implications.

Reporting your employee expense reimbursements to HMRC 

When handling employee expense reimbursements, you have two main options for reporting these expenses:

• Firstly, you can use a P11D form to report expenses and benefits to HMRC at the end of the tax year.
• Alternatively, you can opt for payrolling, where you include the value of the expenses and benefits in the employee’s pay. This method spreads the tax due across the year, which can be more manageable.

Record keeping

You should keep records of all itemised receipts, completed reimbursement forms, the purpose of expenses, amounts spent, and any relevant documentation outlined in your expense policy.

Common challenges between you and your employees when it comes to reimbursements

Disputes over what constitutes a legitimate expense

Disputes over what constitutes a legitimate expense can be a recurring issue between you and your employees. Often, the grey areas arise from differing interpretations of the expense policy.  
 
For instance, while you might consider a client lunch a justifiable business cost, an employee could see a casual coffee meeting the same way.

Delays in reimbursement 

Delayed reimbursements can seriously affect your employees’ morale. When your team experiences repeated delays in getting reimbursed for their expenses, it creates financial strain and frustration.  

This lack of timely compensation can decrease trust in your company, reduce job satisfaction, and lower motivation among your staff. 

Expense reimbursement strategies to consider 

Provide employee training 

For an expense to be reimbursable and non-taxable, it must be incurred wholly, exclusively, and necessarily for business purposes. Ensuring that your employees understand this is essential.

You should invest in training sessions that explain:

• What qualifies as a reimbursable expense. 
• How to document expenses accurately. 
• The importance of timely submissions. 

Create a clear and concise expense policy 

An expense policy template is the backbone of any reimbursement strategy.

Your policy should be:

• Clear: avoid ambiguity by laying out which expenses are eligible for reimbursement. 
• Concise: make sure it’s easy to read and understand, avoiding overly technical language. 
• Accessible: employees should have easy access to this document at all times.

Implement expense management software

Manual expense management can be time-consuming and error-prone. Automating this process with expense management software like Capture Expense offers numerous benefits:

• Efficiency: speeds up the submission and approval process. 
• Accuracy: reduces human errors in data entry. 
• Transparency: provides real-time tracking and reporting of expenses. 
• Compliance: ensures adherence to company policies and tax regulations. 

Meet Capture Expense

Simplify and automate how you manage your expense reimbursements using the intuitive Capture Expense app. Book a personalised demo today to see how we can help.

Managing business expenses can get tricky without clear guidelines. If you want to streamline your financial processes and avoid unnecessary headaches, having a solid company expense policy is essential.  
 
So, let’s walk you through the importance of an expense policy template, how to create one, and the best practices for ensuring smooth implementation.

What is a business expense policy?

A business expense policy is a set of rules that outline how your employees can spend company money. It specifies what types of expenses are allowed, how much can be spent, and the process for reimbursement. This policy helps control costs, ensures compliance with HMRC, and provides your employees with clear guidelines.

For example, your expense policy template might cover travel expenses, office supplies, business entertainment expenses, and more. Clear definitions will help your employees understand what’s acceptable and what’s not, reducing the risk of overspending.

Why your business needs an expense policy

Cost control

• An expense policy establishes clear spending limits for your employees, which helps keep costs in check and makes sure that budgetary constraints are respected. 
• It prevents your employees from making unauthorised purchases. This helps make sure that company funds are used wisely.

Compliance

• A robust expense policy promotes adherence to legal and regulatory requirements, reducing the risk of financial penalties.
• It establishes a framework for audits, simplifying the tracking and verification of expenditures while supporting accountability. 

Transparency and fairness

• Clear guidelines prevent misunderstandings about what constitutes an acceptable business expense.
• A detailed policy holds everyone accountable for their spending, leading to more responsible financial behaviour.

Your step-by-step guide to creating an expense policy template

Creating an expense policy template might seem daunting, but if you get it right it will save you a lot of time, money and headaches down the line.  
 
Here’s your 5-step process to create a robust expense policy template for your company: 

Step 1: Define expense categories

Start by outlining the types of expenses your employees might incur and categorise them. This helps in setting clear guidelines and avoiding confusion.

Common expense categories include:

• Travel expenses: flights, accommodation, meals, local transportation. 
• Office supplies: stationery, software, equipment. 
• Client entertainment: meals, event tickets, gifts. 
• Professional development: training, workshops, conferences.

Step 2: Set clear guidelines for allowable and non-allowable expenses 

Specify what’s covered under each category (including spend limits) and what isn’t. Make these guidelines clear and easily accessible to all your employees.

Examples of allowable expenses:

• Transport and travel: you can claim expenses for fuel, parking, or public transport when traveling for business. 
• Phone and internet bills: you can claim the part of your bills used for business purposes (i.e. sales calls to clients).

Examples of non-allowable expenses:

• Commuting: you can’t claim costs for traveling from home to your office. 
• Personal expenses: costs unrelated to your business aren’t claimable.

Step 3: Establish a simple process for approving and reimbursing expenses 

Outline a straightforward procedure for submitting, approving, and reimbursing expenses. 

• Define your roles: make sure you understand your responsibilities along with those of your employees and finance team in the approval process. 
• Establish deadlines: create submission deadlines to guarantee that everything is processed on time.  
• Clarify documentation needs: be clear about what types of proof (like receipts and invoices) you need to provide and the submission process for them. 
• Establish reimbursement timelines: let your employees know how long a reimbursement will take and how it will get paid (via payroll or check).

Step 4: Outline the requirements for managing documents and receipts

Make it clear what documentation is required for expense claims. This helps in maintaining accurate records and streamlining the approval process.

Types of documents to manage:

• Receipts: itemised receipts for all expenses. 
• Invoices: for any pre-approved large purchases. 
• Justifications: brief explanations for unusual or high-cost expenses.  

Storage requirements:

• Format: make sure all your documents are stored in the required format (i.e. digital or paper). 
• Retention duration: retain all documents for the legally required period (six years in the UK). 

Step 5: Update your policy regularly

An expense policy should evolve with your business. Regular updates will help make sure that the policy remains relevant and effective.

Here are some suggestions to help keep your policy up-to-date: 

• Review frequency: it is recommended to conduct a thorough review of your policy either annually or bi-annually. This allows you to assess its effectiveness and relevance in your industry. 
• Feedback loop: establish a systematic feedback loop by actively gathering insights from both employees and other stakeholders. This can be done through surveys, focus groups, or one-on-one discussions. 
• Policy amendments: based on the feedback collected and any significant changes in business operations, make the necessary amendments to the policy. This process should be transparent, enabling your team members to grasp the rationale behind any changes. 

Top tips when implementing a new expense policy

Communicate clearly

• Hold training sessions to explain the policy to all your employees. 
• Provide written documentation (like FAQs) that your employees can reference.

Enforce consistently

• Apply the policy uniformly to all employees to keep things fair. 
• Monitor compliance and address any violations promptly.

Review regularly

• Periodically review and update the policy to reflect changes in the business. 
• Gather feedback from your employees to identify areas for improvement. 

Keep it simple

• Use simple language and avoid jargon to ensure everyone understands the policy.  
• Limit the number of rules to make it easier for your employees to follow and remember. 

Implement expense management software to enforce policy compliance

Managing expenses manually can be cumbersome and error-prone. Here’s how expense management software like Capture Expense can help:

Automation and accuracy

• Automate the submission and approval process to reduce errors. 
• Guarantee accurate data entry and record-keeping every time.

Real-time tracking

• Track expenses in real time for better visibility and control. 
• Generate reports to monitor spending patterns and identify areas for cost-saving.

Policy enforcement

• Built-in controls make sure that expenses comply with your company policy. 
• Flag non-compliant submissions for review. 

Are you looking to streamline your expense submissions and approvals?

Book a personalised demo today to see how Capture Expense can help you keep your business expenses legitimate while ensuring your employees get reimbursed promptly.

 

Have you ever asked yourself: Are my corporate activities adding value? How do I understand if they’re adding ROI? If you have, you’re in luck. Because we’ve got the answers right here.   

Business entertainment expenses are valuable for building client relationships and enhancing team cohesion. When managed well, they boost productivity, employee satisfaction, and strengthen ties with clients and stakeholders. 

Let’s look at the difference between staff and business entertainment expenses, examples of each, and how to manage them effectively.

What’s the difference between staff and business entertainment expenses?

It’s vital to distinguish between these two types of expenses. They may sound similar, but they serve different purposes:

• Staff entertainment expenses: focus on team-building activities. These events aim to boost your team’s morale and improve employee relations. 

• Business entertainment expenses: target clients and prospects. They aim to maintain and strengthen business relationships.  

Common staff entertainment expenses

Staff entertainment expenses revolve around your current employees. Here are some examples:

• Office parties: celebrating achievements or company milestones can enhance workplace camaraderie. These events often include food, drinks, and sometimes even gifts!

• Team outings: activities like bowling or escape rooms encourage teamwork. They allow your employees to unwind and bond outside the office.

• Workshops and retreats: these events combine learning with leisure. They help your people develop new skills while enjoying a change of scenery.

Common business entertainment expenses

Business entertainment expenses aim to build and maintain positive business relationships with your customers. Here are some examples:

• Client dinners: hosting a dinner for your current or potential clients can foster trust. It’s an opportunity to discuss business matters in a relaxed setting.

• Corporate events: these events target a broader audience. They can include product launches, conferences, or networking functions.

• Golf days: inviting clients for a round of golf can strengthen relationships. It’s a chance to connect on a personal level while discussing business.

Are staff entertainment expenses tax deductible?

Yes, staff entertainment expenses are generally tax deductible.  
 
If you’re a VAT-registered business, you can also recover VAT on these expenses. However, HMRC only permits deductions for the cost of entertaining current employees on your payroll; former employees, subcontractors, and shareholders who do not work in the business do not qualify.  
 
If you host an event attended by both employees and non-employees, you’ll need to calculate and claim only the portion of the costs related to entertaining your employees (excluding any expenses for their guests). 

Are business entertainment expenses tax deductible?

No, business entertainment expenses are generally not tax deductible.  

HMRC views these expenses as non-essential to running your business. They are seen as a way to improve business relations rather than a necessary trade cost. 

“Expenditure on business entertainment or gifts is not allowable as a deduction against profits, even if it is a genuine expense of the trade or business.” — HMRC, Business Income Manual 

How to budget for your entertainment expenses

Setting a budget for entertainment expenses is simpler than you might think. By allocating 2-3% of your overall budget, you can make sure that you’re getting the most out of your spending while keeping your finances in check.  
 
Here’s how you can do it:

Calculate your available budget

Start by assessing your total budget for the quarter. Once you have that figure, calculate 2-3% to determine your entertainment allocation. This will be your guideline to follow throughout the quarter.

Be selective with your spending

Identify which events or entertainment costs are essential and which ones are optional. Focus on spending your budget on activities that provide the most benefit or enjoyment to your team or clients. 

If you’re unsure what your teams and clients will find the most valuable, all you have to do is ask! Gather verbal feedback, ask for thoughts over email, or send out a simple survey to help you better understand where to spend your budget.

Plan ahead

Schedule entertainment expenses for the quarter in advance. This allows you to take advantage of early bird discounts and avoid last-minute splurges that can disrupt your budget.

Track your spending

Keep an eye on your entertainment expenses to make sure you remain within the set allocation. Use simple tracking tools or expense tracking apps to monitor your spending in real time.

Evaluate and adjust

At the end of each quarter, review your spending: 

• Were there areas where you overspent?  

• Did certain activities provide less value than expected? 

Use these insights to adjust your strategy for the next quarter.

How to measure the success of your staff and business entertainment expenses

Making sure your business spends wisely on entertainment is crucial. You’ll need a clear strategy to see if these costs are worth it in the long-term.  
 
Here’s how you can do that:

Conduct a quarterly review of your entertainment expenses

Key metrics to consider:

• Return on Investment (ROI): look at the benefits gained from the expenses. Did they lead to more sales or better client relationships?

• Employee engagement: assess if these activities have improved staff morale or teamwork —happy employees often mean increased productivity.

• Client retention: did entertaining clients help in maintaining relationships? If so, this could be a good sign of success.

Make adjustments

Use the data from your quarterly review to tweak future plans. Ask yourself: are there certain activities that provide better returns?  
 
You should also consider asking for feedback from employees and clients about the events and activities. This will provide insights into what worked and what didn’t.

Implementing policies and procedures

Start by defining what counts as acceptable business entertainment, including specific categories, limits, and the types of activities that qualify. This clarity eliminates confusion and ensures that everyone understands the parameters. 
 
Then, set up an approval process where employees must get pre-approval for major expenses, explaining the business purpose and expected results. This encourages accountability and promotes transparency. Hold regular training sessions to keep staff informed about these policies. 
 
Schedule regular audits to check compliance and make changes as needed based on feedback and new regulations. Consider using intuitive expense management software to simplify reporting and provide real-time spending insights. 
 
By taking these steps, you’ll create a robust framework that supports effective management of business entertainment expenses, ultimately reinforcing your organisation’s financial health and compliance standards. 

All your staff and business entertainment expenses in one place with Capture Expense

Gain real-time insights, maintain budget control, and effortlessly monitor staff and entertainment expenses. Book a demo today to see how you can make better financial decisions!

When you’re employed, it’s common to incur various expenses on behalf of your employer. Whether it’s travel costs, accommodation during business trips, or buying necessary supplies, these expenses can add up.

Often, your employer will reimburse you for these costs, but a common question arises: Are reimbursed expenses taxable in the UK? 

Generally, reimbursed expenses aren’t taxable in the UK if they are for allowable business expenses. This means your employer covers the cost, and you don’t need to declare it as income. 

The definitions  

Before we get into the nut and bolts of taxable expenses, let’s take a look at some key terminology:

Allowable business expenses 

Allowable business expenses are costs that a business can deduct from its income to reduce its taxable profit. These expenses must be directly related to running the business, such as rent, utilities, employee salaries, office equipment, and travel for work purposes. However, they must be necessary and reasonable, meaning they are typical costs for your type of business. Personal expenses or extravagant costs aren’t allowable. 

Reimbursed expenses

Reimbursed expenses are costs that an employee or business owner initially pays out of their own pocket but later gets paid back for by their employer or company. These expenses are usually related to work, like travel, meals, or supplies needed for the job.  
 
For example, if you travel for a business meeting and pay for your hotel and meals, the company might reimburse you, meaning they will give you back the money you spent.

Are reimbursed expenses taxable in the UK?

If the expenses are wholly, exclusively, and necessarily incurred in the performance of your job, they aren’t taxable.

Let’s take a look at a couple of examples:  

For travel expenses 

Let’s say Sarah works as a sales representative and frequently travels to meet clients. She spends £100 on train tickets for a business trip. Sarah submits her receipts to her employer, who reimburses her £100.  
 
Since the travel expense was incurred exclusively for work purposes, Sarah doesn’t have to pay tax on the £100 reimbursement. It’s tax-free.

For remote working expenses 

Imagine John, who has been working from home since the pandemic. His employer agrees to reimburse him £15 per month to cover additional electricity and heating costs. As long as this reimbursement is within the HMRC-approved rate (£6 per week) and is specifically for work-related costs, John won’t be taxed on this amount. 

Are there situations where reimbursed expenses are taxable? 

Yes, this usually happens when the expenses aren’t solely for work, or if they are seen as providing a personal benefit. 
 
let’s look at a couple examples:  

For company car expenses

Alex, who has a company car that he uses for both personal and business trips. His employer reimburses him for the fuel he uses, covering both personal and business mileage. Since part of the reimbursement is for personal use, this portion is taxable as a benefit-in-kind. Alex will have to pay tax on the part of the reimbursement that covers his personal travel. 

For non-approved home office equipment 

Let’s say Maria buys an expensive chair to use while working from home and submits the cost to her employer. If her employer reimburses her but the chair isn’t considered necessary for her work, or if the amount exceeds the typical cost, the reimbursement could be treated as a taxable benefit. In this case, Maria might have to pay tax on the reimbursement. 

How to make sure your reimbursed expenses aren’t taxed 

If you want to avoid any surprises at tax time, it’s important to: 

1. Keep detailed records of all expenses, including receipts and explanations of how they relate to your work.
    
2. Understand HMRC’s guidelines on what constitutes a legitimate, non-taxable expense.
    
3. Communicate with your employer about how expenses will be reimbursed and whether they might be taxable. 

Simplify and automate how you manage your expense reimbursements  

With Capture Expense, you can easily view, track, and classify your reimbursements, helping you quickly determine which expenses are taxable and which aren’t. Book a personalised demo today. 

One of the most effective ways to optimise your financial health is to take full advantage of tax-deductible expenses. These deductions can significantly reduce your taxable income, thereby lowering your overall tax bill.  

We know that determining what qualifies as a “deductible expense” can be tricky. That’s why we’ve outlined what Revenue considers a legitimate expense, common examples of tax-deductible expenses in Ireland, and how to claim a deduction for expenses incurred. 

So, if you run a business in Ireland and want to save money and reduce your tax liability, you’ve come to the right place!

What are tax-deductible expenses in Ireland?

Tax-deductible expenses are costs that can be deducted (hence the name) from your income to reduce the amount of tax you owe.  

You need to make sure that any and all tax-deductible expenses you claim are used for business purposes, and not for personal use.

It’s also worth noting that in order to claim these deductions, you must keep accurate and up-to-date documentation (such as receipts).

What about expenses that are used in both a business and personal capacity?

When you spend money on something that serves both business and personal purposes, you can claim a deduction for part of the expense. 

For example: if you use your mobile phone for work and for home, you can claim a deduction for the business portion of your phone bill. Let’s say 60% of your phone usage is for business, you can therefore deduct 60% of the total phone bill as a business expense. 

Common examples of tax-deductible expenses in Ireland

• Travel and subsistence: costs related to business travel such as transport fares, accommodation, and meals, are deductible. This means if you travel for work, you can claim back these expenses.

• Employees’ salaries: wages and salaries paid to your employees can be deducted. This includes regular pay, bonuses, and pensions.

• Rent and office maintenance: money spent on renting your office space and maintaining it, like cleaning or repairs, is deductible. Utilities such as electricity, water, and heating for your office are also included. 

• Office equipment: costs for purchasing office supplies and equipment, such as computers, cabinets, and desks, can be claimed as expenses.

• Marketing and PR: expenses for promoting your business, like advertising, marketing campaigns, and PR activities, are also deductible.

• Training and education: costs for courses, workshops, or seminars that improve your business skills or those of your employees are deductible.

• Professional fees: fees paid to accountants, solicitors, or consultants for business-related services are also eligible.

• Phone bills: costs for business-related phone calls and mobile plans are deductible. As mentioned above, you need to make sure that the expense is solely for business purposes (or appropriately apportioned if used for both personal and business needs). 

How to claim expenses through Revenue

To claim tax-deductible expenses in Ireland you need to follow these steps:

1. Log in to Revenue Online Service: access the Revenue Online Service (ROS) using your login details.
    
2. Select the form: choose the relevant form for your business—Form 11 for self-assessed individuals or Form CT1 for companies.
    
3. Enter your expenses: fill in the sections related to expenses on the form. You’ll need to provide details and amounts for each expense you’re claiming.
    
4. Submit the form: review your entries and submit the form online.
    

Remember to keep all your records and receipts in case Revenue requests them later. 

Keep track of all your tax-deductible expenses in Ireland

Stay on top of your spend and keep all your tax-deductible expenses in one place; including your cumulative mileage rates and ERR governed by Revenue.
 
Never miss a deduction and reduce your tax liability with Capture Expense. Book a demo today to see how we can help.   

Understanding the difference between deductible and non-deductible expenses can significantly impact your financial planning and tax liability.

By knowing what you can and can’t deduct, and by keeping meticulous records, you can take full advantage of the tax benefits available to you.  

With that in mind, let’s break down deductible and non-deductible expenses, provide examples of each, and share our top tips on how to keep track of them.

What are deductible expenses?

Tax-deductible expenses are costs you incur while running your business that you can subtract from your total income, lowering the amount of tax you need to pay. These expenses are split into two main types:

1. Direct expenses: costs directly tied to making money, like buying materials or paying employees.
    
2. Indirect expenses: costs necessary to run your business but not directly tied to income, like office rent and utility bills.

You can claim both types of expenses on your tax return. However, there are limits on how much you can claim for indirect expenses. For instance, you can only claim part of your office rent based on how much of the office is used for business. 

Common examples of deductible expenses

Here are 8 of the most common deductible expenses in the UK: 

1. Office supplies

This includes things like paper, pens, printer ink, and postage. If you pay for software on a subscription or use it for less than two years, you can also claim these costs.

2. Phone and internet bills

You can claim the portion of your phone and internet bills used for business. Make sure to separate business use from personal use.

3. Business premises

Costs like rent, business rates, electricity, water, and building insurance for your business location can be claimed. However, you can’t claim the cost of buying the property.

4. Transport and travel

You can claim expenses for fuel, parking, train, or bus fares if the travel is for business purposes. This doesn’t include commuting to your regular workplace.

5. Legal and professional costs

Fees for accountants, financial advisers, solicitors, and surveyors are deductible if they are for business purposes. 

6. Raw materials and stock

If your business sells products, you can claim the costs of raw materials or stock.

7. Marketing expenses

Costs for advertising, maintaining a website, social media ads, and traditional marketing like print ads can be claimed.

8. Staff costs

Salaries, wages, bonuses, pensions, and even subcontractor costs can be claimed as allowable expenses. However, payments to partners in a business partnership aren’t eligible.

What are non-deductible expenses?

Non-deductible expenses are costs that you can’t subtract from your income to reduce your taxes, even if they are related to your business.  
 
HM Revenue and Customs (HMRC) does not allow these expenses to be used as deductions. This means you must pay taxes on these costs because they don’t lower your taxable income. 

Common examples of non-deductible expenses

Let’s look at 6 examples of non-deductible expenses in the UK: 

1. Travel from home to your office

You can’t claim the cost of commuting from your home to your rented office or workspace. 

2. Everyday lunches

Daily lunch expenses can’t be claimed against employment taxes unless you’re away from your normal place of work. 

3. Personal expenses

Any costs that aren’t directly related to your business can’t be claimed.

4. Fines and penalties

Any fines or penalties incurred, such as self-assessment penalties, parking fines, or VAT penalties, are disallowable expenses.

5. Unpaid work

You can’t claim the value of work done by yourself or your family if no one got paid for it.

6. Residential accommodation

Costs for your home can’t be claimed unless they’re absolutely necessary for your business. 

Tips for tracking your expenses

Properly tracking your expenses throughout the year can make tax time much easier and make sure you don’t miss out on any potential deductions.

Here, we’ve outlined a few of our top tips for tracking expenses:

• Keep receipts and invoices: save all receipts and invoices for your deductible expenses. This documentation is crucial if you need to prove your deductions to tax authorities.

• Use a dedicated bank account: for business expenses, consider using a separate bank account or credit card. This can simplify tracking and prevent mixing personal and business expenses.

• Maintain a detailed log: for expenses like mileage or home office use, keep a detailed log with dates, amounts, and purposes. There are various expense management apps like Capture Expense that can help with this.

• Consult a tax professional: tax laws can be complex and change frequently. Consulting a tax professional can help make sure you are claiming all possible deductions and staying compliant with HMRC. 

Track all your expenses in granular detail

Our expense reporting software offers unmatched flexibility in tracking both your deductible and non-deductible expenses, ensuring you always have full spend visibility and stay compliant with HMRC. Book a demo today to see how we can help.  

When you take that first step into the world of UK taxes and National Insurance contributions (NICs), you might come across various terms that can seem confusing at first.  
 
One such term is “Class 1A NICs”. Understanding what these are, when they apply, and how they impact you or your business is crucial for maintaining compliance with HMRC.  
 
But don’t worry, we’ve done all the heavy lifting for you. Here’s what you need to know about Class 1A NICs. 

What are National Insurance Contributions (NICs)?

Let’s take a step back for a second. For those who aren’t entirely familiar with what NICs are: 
 
National Insurance contributions are payments made by both employees and employers in the UK to fund certain state benefits, including the state pension and various social security benefits. NICs are similar to social security contributions in other countries.

What are the different National Insurance (NI) classes?

Let’s take a look at the various classes of National Insurance for employees and employers: 

• Class 1 NI: applies to employees who earn more than £242 per week and are under the state pension age. It’s automatically deducted by the employer.  
• Class 1A or 1B: are paid by employers on their employee’s expenses and benefits.  
• Class 3: are voluntary contributions an individual can make to make sure their NI record has no gaps.  
• Class 4 NI: contributions apply to self-employed people earning profits of more than £12,570 in a year.  

 It’s worth noting that self-employed professionals no longer have to pay Class 2 NI contributions, but they can still make voluntary contributions.  

What are Class 1A NICs?

Class 1A NICs are a specific type of National Insurance contribution paid by you (the employer). They’re due on most taxable benefits provided to your employees. These benefits are often referred to as benefits in kind and can include things like:

• Company cars 
• Private medical insurance 
• Non-cash vouchers 
• Beneficial loans 

You must pay Class 1A NICs for

• Directors and certain senior employees.  
• Regular employees.  
• Family members or household members of the above, who also receive benefits. 

The conditions for Class 1A NICs to apply 

• The benefit must not already incur a Class 1 NICs liability.  
• The benefit must be related to employment.  
• The benefit must be subject to Income Tax.  

It’s also worth mentioning that there’s an exemption for “smaller” benefits, such as taking an employee out for lunch, as long as the cost is £50 or less.

Under what circumstances are you exempt from paying Class 1A NICs?

You are exempt from paying Class 1A National Insurance contributions if: 

• Your employee receives a benefit in kind that’s non-taxable (such as employer-provided pension schemes) 
• The recipient does not qualify as an “employed earner.” 
• The benefit is covered by a PAYE settlement agreement. 

When are Class 1A NICs due?

Class 1A NICs are due once a year, after the end of the tax year. You must pay these contributions by the 22nd of July (or 19th of July if paying by post). 

It’s also worth noting that from April 2026, the payrolling of BIKs will become mandatory – removing the need for you to complete annual P11D forms. For more information on how this will impact you read Payrolling of BIKs to Become Mandatory from 2026: What you Need to Know 

How are Class 1A NICs calculated?

The amount of Class 1A NICs you need to pay is calculated based on the value of the taxable benefits provided to your employees.  
 
For the tax year 2023/2024, the rate is 13.8%. For example, if the total value of the benefits you provided is £10,000, your Class 1A NICs would be £1,380 (13.8% of £10,000). 

Reporting and paying Class 1A NICs

To report and pay Class 1A NICs, you must:

1. Calculate the total value of all taxable benefits provided to your employees during the tax year. 
2. Complete a P11D(b) form: this form summarises the amount of Class 1A NICs due. It must be submitted to HMRC by 6th July following the end of the tax year. 
3. Pay the Class 1A NICs: make sure the payment is made by the deadlines mentioned above. 

Can your payroll software handle taxable benefits?

If you’re looking to quickly and efficiently manage all your employees’ taxable benefits book a personalised demo today with our sister company Cintra.  

If you employ people in the UK, there are a few ways you can reward them in addition to paying wages or a salary. One of the most flexible options is to offer benefits in kind (BIKs). 

This guide aims to clarify what BIKs are, their purpose, how they are taxed, and the reporting requirements.

What is a benefit in kind?

A benefit in kind is a non-cash benefit provided to employees that has monetary value. These perks are offered in addition to, or in place of, traditional salary payments.

Examples of benefits in kind

The most common examples of a taxable BIKs include the following:

• Private healthcare 
• Travel expenses 
• Childcare vouchers 
• Company cars 
• Gym membership 
• Cycle to work schemes 
• Accommodation expenses 

What is the purpose of offering benefits in kind?

In simple terms, you’re offering your employees valuable perks in addition to their salary.

There are several reasons why you might choose to include certain BIKs in your overall compensation strategy, such as: 

• Attraction and retention: competitive benefits can attract top talent and help retain existing employees.
• Employee satisfaction: perks can enhance job satisfaction and morale.
• Tax efficiency: some BIKs can be more tax-efficient than equivalent salary increases.
• Employee wellbeing: benefits like flexible working arrangements or organised yoga classes can improve employees’ work-life balance, contributing to their overall well-being.

Paying Class 1a NICs on your benefits in kind

As an employer, you are responsible for paying Class 1A National Insurance Contributions (NICs) on most benefits you provide to your employees.  

These contributions are covered by you and are not deducted from your employees’ salaries. 

You must pay Class 1A NICs for:
 

• Directors and certain senior employees.  
• Regular employees.  
• Family members or household members of the above, who also receive benefits.
   

And certain conditions must be met for Class 1A NICs to apply:
 

• The benefit must not already incur a Class 1 NICs liability.  
• The benefit must be related to employment.  
• The benefit must be subject to Income Tax. 
   

It’s also worth noting that there is an exemption when it comes to “smaller” benefits (costing £50 or less) for things like taking an employee out to celebrate their birthday. 

What benefits are subject to Class 1A NICs?

Common taxable benefits that attract Class 1A National Insurance include:
 

• Private medical insurance.   
• Living accommodation.  
• Company cars.   
• Termination awards exceeding the £30,000 threshold that have not already been subject to Class 1 NICs deductions.  
• Beneficial loans.  
   

When don’t you have to pay Class 1A NICs? 

You won’t have to pay Class 1A NICs if:  

• Your employee receives a non-taxable benefit in kind. 
• The beneficiary does not meet the criteria for “employed earner”. 
• The benefit is included in a PAYE settlement agreement. 

How to report benefits in kind

First, let’s take a look at P11D and P11D(b) forms. We’ll briefly go over what they are, why you need them and what’s their main difference. 

What’s a P11D?

A P11D form is used to report BIKs (such as company cars or health insurance) and expenses provided to your employees on top of their regular wages.  
 
P11Ds are essential as they ensure these benefits are properly recorded and taxed, fulfilling legal obligations and ensuring fair tax contributions. 

What’s a P11D(b)?

A P11D(b) form is a declaration that specifies the total Class 1A National Insurance contributions owed on all benefits you provide to your employees. 

What’s the difference between a P11D and a P11D(b)?

While both forms involve reporting benefits and expenses, the P11D focuses on detailing individual benefits provided to your employees, while the P11D(b) declares your overall liability for National Insurance Contributions (NICs) on those benefits.  

 

To ensure compliance with HMRC, you must report benefits in kind annually. Here’s your step-by-step guide outlining the process:
 

When submitting P11Ds:

1. Identify the benefits: determine all BIKs provided to employees during the tax year. 
2. Calculate the value: assess the taxable value of each BIK. 
3. Complete the P11D Forms: Fill out a P11D form for each employee receiving BIKs, detailing each benefit and its value. 
4. Distribute P11Ds: provide copies to employees by 6 July following the end of the tax year.
    

When submitting P11D(b)s:

1. Complete the P11D(b) form: this form summarises the total value of all BIKs provided to employees and calculates the Class 1A NICs due.
2. Submit to HMRC: ensure the P11D(b) is submitted to HMRC by 6 July following the end of the tax year.
3. Pay Class 1A NICs: payment for the Class 1A NICs must be made by 22 July (19 July if paying by cheque).
    

Payrolling benefits in kind: current status and April 2026 changes

As it stands, when it comes to benefits in kind, you have two choices:

1. You can stick with the traditional approach of submitting P11D forms to report employee benefits for tax purposes (if they aren’t processed via payroll). 
2. You can opt to register for payrolling benefits, which means you process employee benefits as part of your usual payroll processing, allowing for the real-time taxation of benefits through PAYE. 

What’s going to change from April 2026?

Starting from April 2026, all BIKs that you provide (except for loans and living accommodation) will have to be reported and taxed through payroll. You must ensure that your current payroll process will be able to handle this new development and take actions to either upgrade or replace your software if necessary. 

Are P11Ds giving you a headache? 

If you’re looking to quickly and efficiently manage all your employees’ taxable benefits book a personalised demo today with our sister company Cintra.  

 

On January 16, 2024, the British government announced a significant change: starting from April 2026, the payrolling of benefits-in-kind will become mandatory. This initiative aims to reduce administrative burdens by fully digitalising the reporting of all employment benefits.

If you haven’t yet embraced payrolling benefits, now is the perfect time to get acquainted with the process. It’s essential to understand the pros and cons, as well as how this shift might impact your business’s finances.

Our blog provides comprehensive guidance on how to register for payrolling benefits: from identifying which types of benefits you can payroll to understanding how to report them and make payments to HMRC.

We’ve got all the information you need to navigate this transition smoothly.

Let’s get started. 

What are payrolling benefits?

Payrolling benefits is a method where the taxable value of benefits you provide to your employees is included in their PAYE calculation. This means that income tax on these benefits is paid at source and spread out over the tax year.

What benefits can you payroll?

These are some of the benefits you can payroll:

• Health insurance 

• Gym memberships 

• Company cars 

• Childcare vouchers or subsidies 

• Mobile phone allowances 

• Private medical insurance 

• Travel expenses 

• Meals provided by the employer

What benefits can you not payroll?

• Living accommodation 

• Loans 

How to register for payrolling benefits 

Registering for payrolling benefits is pretty simple. Here’s what you need to do: 

First, you need to register with HMRC via the payrolling employees taxable benefits and expenses online service, (this must be done before the start of the tax year). 

When registering, you’ll select the benefits to include in payroll. It’s important to note that all employees receiving benefits will have their tax codes adjusted unless you opt out specific employees using the online service.

Keep in mind, this option is available until April 2026. 

And if you miss the deadline to register for payrolling benefits

If you don’t register for payrolling benefits by April 5th, you’ll have to wait until the next tax year to include benefits in your payroll. 

How to notify your employees 

Once you’ve registered to payroll benefits, you need to inform your employees about the process and its impact on them.  
 
You need to notify them by 1 June after the end of each tax year via email, letter, or payslip.  
 
Your notification should also assure them that they won’t be taxed twice because you registered their benefits with HMRC before the new tax year. 

What additional information should you include in your written notification?

To ensure all employees are well informed, your written notification should include:

• Detailed information about all payrolled benefits, including descriptions, values, and cash equivalents. 

• Confirmation of PAYE tax deductions. 

• Amounts payrolled for optional remuneration. 

• Details of any benefits not payrolled.

This will provide transparency and help your employees understand their taxable benefits and financial situation better. 

What else do your employees need to know?

You need to tell your employees that during the first year, their tax codes will be modified to exclude benefits in kind adjustments. 
 
Each month, the adjusted amount will be processed through payroll, and they will be taxed accordingly. 
 
At the end of the year, you will provide them with a statement detailing the taxable benefits they received throughout the year and the nature of those benefits.

What about if you have new employees

For new employees with payrolled benefits, you need to explain the taxation process.

Tell them that:

• Their tax code may be adjusted for benefits from previous jobs, but new benefits won’t be included. 

• Any underpaid tax through their current tax code will still be collected. 

How to cancel your registration

Your registration will remain active unless you choose to cancel it.

To do so, you must notify HMRC before the start of the tax year using the online service for payrolling employees’ taxable benefits and expenses.

If the tax year has already started when you change your mind, you must wait until the end of the tax year before you stop payrolling. 

FAQs

Where can I access more information about the latest developments in mandatory payrolling?

To stay updated on mandatory payrolling developments and requirements, you can read the Employer Bulletins from HMRC.  
 
These bulletins provide important updates, guidance, and changes related to payrolling benefits, keeping you informed about any new developments or requirements. 

Is your current payroll process up to scratch?

If you are looking for a team of experienced payroll experts that can quickly and efficiently manage all your employees’ taxable benefits. Book a personalised demo with our sister-company Cintra.

Revenue is putting more and more effort into helping businesses of all sizes follow their rules and establish good financial practices. However, understanding expense compliance can still be tricky, and the penalties for mistakes can be serious. 

To help you better understand and comply with Revenue’s guidelines, we’ve created this comprehensive guide. Here, you’ll find clear and practical advice on claiming and processing expenses in Ireland, ensuring you stay on the right side of the regulations while maximising your financial efficiency.

Whether you’re a small startup or a large corporation, this guide aims to illuminate the path to seamless expense compliance in Ireland. 

How to make sure your business complies with Revenue 

Many people think Revenue inspectors only care about completed expense claims and receipts, but they actually review your entire travel and expense process.

The 6 key areas Revenue inspectors focus on

1. A clear and enforced policy

Make sure your business has a clear expense policy that all employees understand and follow.

2. Appropriate approval processes

Ensure that the right people are approving expenses at the right levels.

3. Appropriate documentation

Keep detailed records of all receipts and expense forms.

4. Appropriate checks and controls

Implement checks and controls to prevent errors and fraud. Regularly review these controls to ensure they are effective.

5. Tax and VAT compliance

Ensure that all expenses comply with tax and VAT regulations. You need to keep up to date with any changes in these regulations.

6. A robust and secure payment process

Use secure methods for reimbursing employees. Ensure payments are processed accurately and on time.

The VAT rates in Ireland

VAT is a general consumption tax that is charged directly on the sale of goods and services in Ireland.

Here are the rates for 2024:

Rate	Type	Goods and services
23%	Standard	All other taxable goods and services
13.5%	Reduced	Some foods, pharmaceutical products, children’s car seats, energy products and supplies, supply and development of immovable goods.
9%	Reduced	Some foods, newspapers, admission to cultural events, admission to sports facilities, hairdressing.
4.8%	Reduced	Livestock and agricultural supplies.
0%	Zero	Some foods, animal feed, medical equipment, children’s products.

It’s also worth noting that the supply of some services, such as financial, medical and educational services, are exempt from VAT. 

Who can reclaim VAT?

If you are selling goods or services that are subject to VAT, or you are involved in qualifying activities, you can reclaim VAT.

To do this, you need to submit a VAT 3 return. However, you cannot reclaim VAT on goods or services used for making exempt supplies or for non-business activities.  
 
For costs that relate to both taxable and non-taxable activities, you can only reclaim the VAT portion related to your taxable supplies.  
 
It’s also worth mentioning that you have up to four years to claim a VAT repayment.

What VAT can you not reclaim?

You cannot reclaim VAT on the following costs, even if you are registered for VAT and make only taxable supplies: 

• Food, drink, or personal services for you, your agents, or employees (unless part of a taxable service) 

• Accommodation (unless related to a qualifying conference) 

• Food, drink, accommodation, or entertainment included in advertising costs 

• Entertainment 

• Passenger motor vehicles (except stock or qualifying vehicles) 

• Petrol (unless used as stock-in-trade) 

• Contract work involving non-deductible goods 

• Goods subject to a margin scheme 

• Costs for property used for non-business purposes 

Civil service mileage rates in Ireland

You can reimburse your employees for using their personal vehicles for business journeys. This does not include commuting from home to their normal place of work.

You have the option to either reimburse the actual travel expenses incurred by the employee or provide a fixed mileage allowance per kilometre. 

Here are the new civil service rates for mileage allowance in Ireland for 2024, effective from 1st September 2023. 

Civil service motoring and bicycle rates

Cars (rate per kilometre)

 

Motor travel rates (from 1 September 2022)

Distance band	Engine capacity up to 1200cc	Engine capacity 1201cc – 1500cc	Engine capacity 1501cc and over
Up to 1,500 km (Band 1)	41.80 cent	43.40 cent	51.82 cent
1,501 – 5,500 km (Band 2)	72.64 cent	79.18 cent	90.63 cent
5,501 – 25,000 km (Band 3)	31.78 cent	31.79 cent	39.22 cent
25,001 km and over (Band 4)	20.56 cent	23.85 cent	25.87 cent

For electric vehicles, mileage claims will follow the rate applicable to engine capacity 1201cc-1500cc.

 

Reduced motor travel rates per kilometre

Engine Capacity up to 1200cc	Engine Capacity 1201cc to 1500cc	Engine Capacity 1501cc and over
21.23 cent	23.80 cent	25.96 cent

Reduced mileage rates apply to work-related journeys that aren’t solely for job performance. Examples include attendance at approved courses or conferences. 

Motorcycles (rate per kilometre)

Motorcycle rates (from 5 March 2009) 

Distance	Engine capacity up to 150cc	Engine capacity 151cc – 250 cc	Engine capacity 251 cc – 600 cc	Engine capacity 601cc and over
Up to 6,437 km	14.48 cent	20.10 cent	23.72 cent	28.59 cent
6,438 km and over	9.37 cent	13.31 cent	15.29 cent	17.60 cent

Bicycles

Bicycle rates (from 1 February 2007

Rate per km

8 cent

If you’re interested in learning more about Civil Service Mileage Rates and how to calculate mileage claims click here.  

The civil service subsistence rates for 2024

Rates for assignments within the State

Overnight allowance

Domestic overnight subsistence rates (from 14 December 2023) 

Rate category	Rate
Normal rate	€195.00
Reduced rate	€175.50
Detention rate	€97.50

  

The overnight allowance applies to assignments lasting up to 24 hours. The assignment must be at least 100 kilometres from your employee’s home and regular workplace. 

The rate category is determined by the duration of the assignment:

• The normal rate applies for up to 14 nights.
• The reduced rate applies for the following 14 nights.
• The detention rate applies for each of the next 28 nights. 

For assignments exceeding 56 nights, your employee must apply to Revenue to confirm that subsistence is still available.

The period of subsistence at any single location is limited to six months. 

Day allowances

Domestic day subsistence rates (from 14 December 2023) 

Period of assignment	Rate
Ten hours or more	€42.99
Between five and ten hours	€17.92

 The assignment must be more than eight kilometres from your employee’s home and normal workplace. It’s also worth noting that they can only claim both a day and overnight allowance if they work five hours or more the next day. 

Rates for assignments outside the State

Short term assignment 

Subsistence rates for short term assignments 

Period of assignment abroad	% of normal overnight rate
First month	100%
Second and third month	75%
Fourth, fifth and sixth month	50%

 These rates can be applied to a single temporary assignment abroad lasting up to six months. 

Long term assignment

A long-term assignment lasts over six months. During the initial month, you can provide subsistence at the overnight rate to help your employee find self-catering accommodation. For the rest of the assignment, you can cover reasonable accommodation costs and 50% of the ten-hour day rate.

If you have remote working expenses

You can make a payment of €3.20 per workday to a remote working employee without deducting:

• Income Tax 
• Pay Related Social Insurance (PRSI)
• Universal Social Charge (USC)

This payment is to cover expenses incurred such as broadband, heating and electricity costs. 

And for expenses higher than €3.20 per workday 

Your employee’s daily expenses might go over €3.20, and you can reimburse them for these costs. However, if the amount exceeds €3.20 per workday, you need to deduct tax from it.  
 
Make sure to keep records of all the payments made.

What you need to know about Enhanced Reporting Requirements

Starting January 1, 2024, your finance teams in the Republic of Ireland must adhere to updated payment reporting regulations; known as Enhanced Reporting Requirements (ERR). These regulations enhance transparency in expenditure but present challenges for timely compliance. The new reporting requirements are introduced by Section 897C of the Finance Act 2022.

What needs to be reported?

 

1. Small benefit exemption: you need to report the date paid and the value of the benefit.

2. Remote working daily allowance: report the total number of days, amount paid, and date paid.

3. Travel and subsistence payments: report the date paid and amount for each payment under the following categories:

• Travel (vouched and unvouched) 

• Subsistence (vouched and unvouched) 

• Site-based employees (including ‘country money’) 

• Emergency travel 

• Eating on site

How to report this

• Payments must be reported to Revenue at the time of payment or in advance.
• Submit reports via the Revenue Online Service (ROS), either manually or using accounting or ERP software.

What you need to know about digital record-keeping

In Ireland, you can go paperless by storing receipts digitally instead of keeping paper copies.

However, you must follow certain requirements to comply with the rules on storing, maintaining, transmitting, reproducing, and communicating records electronically.

One example of these requirements is ensuring the scan quality is high enough for the receipt to be easily readable.

You can find all the necessary requirements in Revenue’s Electronic Storage manual. 

4 easy steps to comply with Revenue

Here’s a very brief overview of what you need to do to make sure your business is fully compliant:

Step 1: designate specific individuals at appropriate levels to approve expenses

• Make sure that each expense is reviewed and authorised by someone with the appropriate level of authority and responsibility within your organisation, thereby maintaining accountability and preventing misuse of funds. 

• Ensure even the highest-ranking employees submit their expenses for approval.
   

Step 2: maintain a traceable audit trail

• Use an expense management system that tracks every step of the process.

• Make sure that every expense is logged and traceable from submission to approval and reimbursement. 

Step 3: keep valid evidence

• Always obtain valid VAT receipts and credit card slips for expenses.

• Attach these receipts to the corresponding expense claims.

Step 4: find an expense management system that fully complies with Revenue’s regulations 

• It is essential to identify an expense management system. like Capture Expense, that ensures complete compliance with all of Revenue’s regulations.
  

By following these guidelines, you can ensure your business meets Revenue’s requirements and is prepared for an inspection. 

The expenses software for total Revenue compliance

Get all the features and functionality you need to keep your employee expenses compliant, in one central platform. Book a demo to see Capture Expense in action.