Insights
How Does Expense Management Software Work? The Full Claim Lifecycle
So, how does expense management software work? We cover the full claim lifecycle from capture to approval routing and card reconciliation.
By Capture Expense
Expense management software captures a receipt or card transaction, codes it against your policy, routes it to the right approver, works out the VAT and tax treatment, pays the employee, and posts the result into your accounting ledger. Six stages, one audit trail, no spreadsheet in the middle.
Figures verified against HMRC guidance on 28 July 2026.
Most guides on this subject stop at “the employee takes a photo and the manager clicks approve.” In reality, that covers about ninety seconds of a process that runs for a fortnight and touches your VAT return, payroll and your accounts. So what happens during the rest of it?
This page covers the rest of it: what the software does between submission and the bank payment, how approval rules are actually configured, what happens when a card transaction has no receipt, and what one claim looks like once it lands in the accounts.
What does expense management software do?
Ultimately, expense
management software is a controlled workflow sitting on top of a document store and a rules engine. It does five jobs a spreadsheet
can’t
manage:
-
It captures the evidence at the point of spend, so the receipt exists as a digital record before it goes through a washing machine.
-
It applies your policy before the claim is submitted, not after finance has already paid it.
-
It routes the claim to someone with the authority to approve that amount, and records who did what and when.
-
It works out the tax treatment—for a UK business, that means the VAT recovery position and whether anything needs reporting to HMRC.
-
It produces a posting, a coded journal your accounting system accepts without a human retyping it.
Put together, those five jobs turn expense management from a paper chase into something closer to automated bookkeeping—the receipt, the policy check and the accounting entry all happen inside one system, rather than being scattered across an inbox, a spreadsheet and a filing cabinet.
The claim lifecycle, in six stages
Every claim, whatever the type, goes through the same six stages—though the details change a lot depending on what’s being claimed.
-
Capture: data enters the system, either from an employee or from a card feed.
-
Coding and policy check: category, cost centre, project, tax code, and a test against the rules that apply to that person.
-
Submission: the claim locks, becomes read-only, and gets a reference and a timestamp.
-
Approval routing: one or more approvers, chosen by rule rather than by memory.
-
Finance review and tax determination: evidence quality, VAT recovery, duplicate check.
-
Payment and posting: money moves and the accounts get a journal entry.
Walk a real claim through, end to end
Pick a claim type and a company setup below. The walkthrough shows what data’s needed at each stage, who touches it, what commonly goes wrong, and what your finance team is left holding.
Claim lifecycle walkthrough
No company cards. The employee funds the spend, and the company owes them from the moment the money leaves their account. Every day the claim sits unapproved is a day an employee is lending money to their employer.
- Capture
Data required
Date, start and end postcode, whether the trip was one way or a round trip, the business reason, the vehicle and its engine size, and any passengers carried. A postcode or GPS lookup returns the distance, so nobody types a number.
Who touches it
The employee, usually on a phone at the end of the journey.
What goes wrong
Home to a permanent workplace is ordinary commuting, and it’s not claimable. If the app lets someone start a route at their front door on a normal office day, that mileage is taxable pay dressed up as an expense.
- Coding and policy check
Data required
Mileage category, cost centre, project or job code, and the rate band. The 2026–27 approved rate is 55p for the first 10,000 business miles in the tax year and 25p above that.
Who touches it
The system, at the moment of entry.
What goes wrong
The 10,000 mile threshold is per employee per tax year, not per claim. Software that doesn’t carry a running total across the year keeps paying 55p on mile 10,001 and quietly creates a taxable excess.
- Submission
Data required
Distance multiplied by the rate, plus 5p per mile for each passenger carried on the same business journey.
Who touches it
The employee submits. The claim locks and becomes read only.
What goes wrong
A passenger supplement claimed for someone who wasn’t travelling on company business, or the same journey submitted twice under two slightly different dates.
- Approval routing
Data required
The claimant’s manager on the day of submission, and that manager’s own approval limit.
Who touches it
One approver.
What goes wrong
The manager’s on annual leave. Without a delegate rule, the claim sits until they’re back. Set an out of office delegate and an escalation timer—for example, escalate to the next level up after five working days.
- Finance review and VAT determination
Data required
A fuel VAT calculation using the advisory fuel rate for that vehicle, plus fuel VAT receipts dated around the journey.
Who touches it
Finance, or the system automatically if fuel VAT recovery is switched on.
What goes wrong
Most mileage claims lose the VAT entirely. You can’t reclaim VAT on 55p. You reclaim the VAT fraction of the fuel element only, taken from the advisory fuel rate, and only if you hold fuel receipts covering at least that amount.
- Payment and posting
Data required
An export of approved, unpaid claims mapped to a non taxable payment element in the payroll, cut before the payroll deadline.
Who touches it
Finance exports the file. Payroll imports it and pays it with salary.
What goes wrong
Missing the payroll cut off. A claim approved the day after cut off waits a full month. It also has to land on a non taxable element—coded as taxable pay by mistake, a reimbursement gets taxed and NI’d, and the fix is a payroll amendment rather than an expense correction.
What your finance team is left holding: mileage, 120 miles at 55p, £66.00
Ledger posting
Debit motor and travel expense against the cost centre, credit the employee creditor account. Where fuel VAT is recovered, a small debit to VAT input tax splits out of the expense line.
VAT position
Recoverable on the fuel element only. At 17p per mile for a 1600cc to 2000cc petrol car, 120 miles gives a fuel element of £20.40, of which £3.40 is VAT. The remaining £45.60 of the £66.00 claim carries no VAT at all.
Tax and reporting
Nothing to report while the rate paid is at or below the approved rate. Pay above 55p and the excess is taxable earnings. Pay below it and the employee can claim Mileage Allowance Relief on the difference.
Typical elapsed time
Submission to money in the employee’s account: 5 to 35 days, depending where in the payroll month the claim was approved.
What your finance team is left holding: mileage, 120 miles at 55p, £66.00
Date, start and end postcode, whether the trip was one way or a round trip, the business reason, the vehicle and its engine size, and any passengers carried. A postcode or GPS lookup returns the distance, so nobody types a number.
The employee, usually on a phone at the end of the journey.
Home to a permanent workplace is ordinary commuting, and it’s not claimable. If the app lets someone start a route at their front door on a normal office day, that mileage is taxable pay dressed up as an expense.
Mileage category, cost centre, project or job code, and the rate band. The 2026–27 approved rate is 55p for the first 10,000 business miles in the tax year and 25p above that.
The system, at the moment of entry.
The 10,000 mile threshold is per employee per tax year, not per claim. Software that doesn’t carry a running total across the year keeps paying 55p on mile 10,001 and quietly creates a taxable excess.
Distance multiplied by the rate, plus 5p per mile for each passenger carried on the same business journey.
The employee submits. The claim locks and becomes read only.
A passenger supplement claimed for someone who wasn’t travelling on company business, or the same journey submitted twice under two slightly different dates.
A fuel VAT calculation using the advisory fuel rate for that vehicle, plus fuel VAT receipts dated around the journey.
Finance, or the system automatically if fuel VAT recovery is switched on.
Most mileage claims lose the VAT entirely. You can’t reclaim VAT on 55p. You reclaim the VAT fraction of the fuel element only, taken from the advisory fuel rate, and only if you hold fuel receipts covering at least that amount.
Debit motor and travel expense against the cost centre, credit the employee creditor account. Where fuel VAT is recovered, a small debit to VAT input tax splits out of the expense line.
Recoverable on the fuel element only. At 17p per mile for a 1600cc to 2000cc petrol car, 120 miles gives a fuel element of £20.40, of which £3.40 is VAT. The remaining £45.60 of the £66.00 claim carries no VAT at all.
Nothing to report while the rate paid is at or below the approved rate. Pay above 55p and the excess is taxable earnings. Pay below it and the employee can claim Mileage Allowance Relief on the difference.
What your finance team is left holding: subsistence, evening meal, £22.00
A photograph of the till receipt, the date, the merchant, the gross amount, and whether anyone outside the company was present. Every line has to be legible, not just the total.
The employee, at the table or the same evening.
A card terminal slip isn’t a receipt. It shows the amount and the last four digits of a card, not the VAT number or what was bought, so it won’t support a reclaim.
Subsistence category, the trip it belongs to, hours away from the normal workplace, and whether the journey ran past 8pm. The 2026–27 benchmark scale rates are £5 over five hours, £10 over ten hours and £25 over fifteen hours where the journey continues past 8pm.
The system, testing the amount against the policy limit for that category and that person.
HMRC’s older manual page EIM05231 still shows the superseded 2009 to 2016 rates, and several accountancy sites have copied them. The £15 figure is out of date. EIM30240 is the current page. A policy limit built from the wrong page understates the fifteen hour allowance by £10 a head.
The receipt image, the amount, the category, and a note explaining anything above the policy limit.
The employee.
Alcohol on the same receipt. It’s often still a legitimate business cost, but many policies exclude it, and a system that can’t split a receipt line by line rejects the whole thing instead of just the glass of wine.
Whether the receipt is a full VAT invoice or a simplified one, and whether everyone at the table was an employee.
Finance, or an automated tax code rule tied to the expense category.
A restaurant bill of £250 or less including VAT only has to be a simplified invoice, which doesn’t need to show the VAT amount separately. Finance has to apply the VAT fraction themselves. Above £250 you need a full VAT invoice naming your business, and most restaurant bills aren’t.
Debit subsistence expense net of VAT, debit VAT input tax, credit the employee creditor account.
£22.00 gross gives £3.67 recoverable and £18.33 of cost, provided the receipt is valid and everyone present was an employee. If a client was at the table, the whole receipt becomes business entertainment, and the VAT on the non employee share is blocked.
Nothing to report where the spend is genuine subsistence on a qualifying business journey and the evidence is retained. Round sum allowances paid without evidence are pay, and get taxed like pay.
What your finance team is left holding: company card, hotel, £186.40
Nothing from the employee. The transaction arrives first, from the card feed: date, merchant, gross amount, card last four digits and cardholder.
The card feed or Open Banking connection. Nobody types this.
The pre authorisation amount on the feed is frequently not the settled amount. A hotel that pre authorises £200 and settles at £186.40 produces a changing figure for a day or two. Matching too early manufactures a mismatch that was never real.
The cardholder attaches the hotel VAT invoice, in the app or by forwarding the confirmation email. The system matches on amount, date and merchant.
The cardholder, then the matching engine.
Unmatched is the normal outcome, not the exception. The amount matches, but the merchant descriptor is a payment processor’s trading name, or the receipt’s dated at check in and the settlement at check out. Anything unmatched needs a queue with a named owner and an age, or it becomes a year end problem.
The matched pair, coded to a cost centre and category, submitted against a card statement period rather than an ad hoc claim.
The cardholder submits the statement period.
The money’s already gone. If the cardholder never produces a receipt, the cost still hits the ledger, the VAT can’t be reclaimed, and unexplained personal spend may become a benefit in kind.
The hotel’s own VAT invoice, addressed to the business, showing the VAT registration number and the VAT amount.
Finance.
Booking confirmations and online travel agent receipts aren’t VAT invoices. You need the folio the hotel issues at checkout. Chasing those six months later is the single most common cause of lost input tax on travel.
The transaction already sits in a card control account from the day the feed posted it. Coding the claim debits accommodation expense and VAT input tax and clears that control account. No employee creditor is created, because nobody’s owed anything.
£186.40 gross gives £31.07 recoverable and £155.33 of cost, but only against the hotel’s own VAT invoice. A booking confirmation won’t support it.
No P11D entry for a genuine business trip. Personal spend on a company card that isn’t repaid is earnings, and has to be treated as such.
What your finance team is left holding: out of pocket, taxi, £34.50
A photograph of the receipt, the date, the merchant, the amount, the journey purpose, and the names of anyone else in the car.
The employee.
Ride hailing apps email a receipt rather than hand one over at the kerb, so it lands hours later and the claim gets rebuilt from memory. Capture through WhatsApp, Slack or Teams exists precisely to catch the moment before the detail evaporates.
Category, cost centre, and the policy rule that applies—for example, a cap per journey or a requirement that a late night taxi is pre approved.
The system.
Duplicates. The same receipt photographed twice on different days, or claimed once by each of two people who shared the taxi. Duplicate detection has to compare merchant, amount and date across all claimants, not just within one person’s history.
Receipt image, amount, purpose. The claim locks and gets a reference the employee can quote when chasing.
The employee.
Claims submitted months after the event, usually in a batch at year end. A stated submission deadline that the system actually enforces is what stops a January taxi landing in a July claim.
Whether the operator is VAT registered at all.
Finance.
Assuming 20% VAT on every taxi receipt. Licensed drivers operating as sole traders below the £90,000 registration threshold charge no VAT whatsoever, and reclaiming it anyway is an error that surfaces in an inspection.
Debit travel expense, debit VAT input tax only if VAT was actually charged, credit the employee creditor account.
Recoverable only if the operator is VAT registered and the receipt shows it. HMRC does allow a claim on supplies of £25 or less without a receipt where you can show the supplier is registered, but that’s a narrow concession, not a policy you should build around.
Business travel to a temporary workplace isn’t a benefit. Travel between home and a permanent workplace is, and paying for it creates a tax charge.
What your finance team is left holding: foreign currency, client dinner, £140.00
Receipt image, the foreign amount, the currency, the date, and who was present. The card statement will later show a sterling figure that doesn’t match.
The employee.
The employee types the sterling number from their banking app, which already includes the card issuer’s spread. Finance then holds three different sterling values for one dinner and can reconcile none of them.
Which exchange rate, and which date. The options are the rate on the transaction date, the rate on the settlement date, a monthly corporate rate, or the actual rate the card charged.
The system, applying whatever rate policy you’ve configured.
Having no stated rate policy. Pick one, write it into the expense policy, and let the system apply it consistently. The difference on one dinner is pennies. Across a year of travel, it’s a reconciliation nobody can close.
Foreign amount, currency, converted sterling amount, the rate used and the rate date, all stored on the claim record.
The employee submits. The system stamps the rate.
Storing only the sterling figure. Without the original currency, the original amount and the rate applied, you can’t explain the number to an auditor or correct it later.
Whether any foreign VAT was charged, and whether it’s worth the cost of recovering it.
Finance.
Dutch VAT on a Dutch dinner isn’t UK input tax and can’t go on a UK VAT return. It’s recoverable only through an overseas refund claim, if at all. Coding it as recoverable UK VAT is common, and expensive.
Debit client entertaining in sterling at the stamped rate, credit the employee creditor account. Any difference between the stamped rate and the rate actually settled posts to exchange differences.
No UK input tax at all. Foreign VAT isn’t recoverable on a UK return, and client entertaining VAT would be blocked in any case.
Client entertaining isn’t deductible for corporation tax. Keep it in a dedicated account code so it can be added back at year end without anyone having to go looking for it.
The claimant’s manager on the day of submission, and that manager’s own approval limit.
One approver.
The manager’s on annual leave. Without a delegate rule, the claim sits until they’re back. Set an out of office delegate and an escalation timer—for example, escalate to the next level up after five working days.
The claim total, the threshold values, and the named second approver for each band. A common UK setup is manager only up to £250, manager plus head of department to £2,500, and finance director above that.
Two or more approvers, in sequence rather than in parallel.
Claim splitting. One £600 claim submitted as three £200 claims to stay under the threshold. The control is a rule that tests the running total per claimant per period, not the value of the individual claim in front of you.
Manager approval, then a finance queue with a documented review standard: receipt present and legible, VAT determination made, coding correct, duplicate check passed.
The line manager, then a named finance reviewer.
Segregation of duties. If the same person can approve a claim and release the payment, the control is decorative. The system has to block self approval outright and keep the approver role separate from the payment release role.
An export of approved, unpaid claims mapped to a non taxable payment element in the payroll, cut before the payroll deadline.
Finance exports the file. Payroll imports it and pays it with salary.
Missing the payroll cut off. A claim approved the day after cut off waits a full month. It also has to land on a non taxable element—coded as taxable pay by mistake, a reimbursement gets taxed and NI’d, and the fix is a payroll amendment rather than an expense correction.
Submission to money in the employee’s account: 5 to 35 days, depending where in the payroll month the claim was approved.
A Bacs payment file carrying sort code, account number, amount and a reference the employee will actually recognise on their statement.
Finance generates and releases the file. A second authorised signatory approves it at the bank.
Bacs settles on a three working day cycle, so a file submitted on a Thursday credits the following Tuesday. A payment rejected because of a wrong account number comes back as a returned item, and the claim has to be reopened and re paid rather than simply resent.
Submission to money in the employee’s account: 4 to 8 working days. One to three for approval, one for the payment run, three for the Bacs cycle.
No company cards. The employee funds the spend, and the company owes them from the moment the money leaves their account. Every day the claim sits unapproved is a day an employee is lending money to their employer.
Company expense cards in use. For card spend, this isn’t a reimbursement at all. The money leaves the company account first, and the claim exists only to code the transaction and collect the VAT evidence. Out of pocket claims still run the full reimbursement path.
Stage one: capture, and why the source matters
Data gets into the system three ways, and they behave completely differently.
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Employee capture: Someone photographs a receipt, and the image goes through the extraction pipeline, which returns merchant, date, gross amount, VAT amount and VAT number with varying confidence per field. Amount’s easy. A VAT registration number on a faded thermal receipt isn’t. Good software shows you its confidence rather than pretending every field is certain.
-
Card feed: A company card transaction arrives without anybody doing anything, through Open Banking or a direct card feed. This is the reverse of the usual order—the cost exists before the claim does. Some platforms, including Capture Expense, also let you issue the expense card itself—physical, virtual, or single-use—so the transaction and the spend limit sit on the same system from the outset, rather than being reconciled after the fact. That’s why card programmes need a different workflow, which we cover below and on the card reconciliation page.
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Messaging capture: Sending a receipt through WhatsApp, Slack or Teams removes the step where the employee has to remember to open an app. It matters more than it sounds—the gap between spending money and recording it is where most missing receipts get created, and closing that gap is the whole point of mobile capture.
Here’s one that almost nobody mentions. HMRC’s record keeping notice, VAT Notice 700/21, confirms at section 6 that if an image is retained and contains all the detail required for VAT purposes, you don’t need to keep the original invoice. The photo is the record. You can throw the paper away.
Stage two: coding and the policy engine
The policy engine is the part buyers tend to under specify, then complain about later. It does four things:
-
Category rules: A per item or per journey cap, tied to the expense category, the person’s role and their department.
-
Receipt rules: Whether a receipt is mandatory, and above what value. A £5 threshold just generates noise—a £25 threshold aligns with the point at which HMRC’s own guidelines for compliance on employee expenses allow a VAT claim without one.
-
Date rules: A submission deadline measured from the transaction date, not from whenever the employee got round to it.
-
Tax rules: Which VAT treatment attaches to which category, so subsistence, entertaining and mileage don’t all default to 20% recoverable.
The distinction that matters at buying time is between a warning and a block. A warning tells the employee they’re over the limit and lets them submit anyway with a justification; a block stops them outright. Most organisations want warnings for soft limits and blocks for hard ones, which means the engine has to support both against the same category. Our page on expense policy compliance covers how the rules get set, while our company expense policy template covers what should be in the policy in the first place.
Stage three: submission, and why locking matters
Submission looks like a formality, but it’s the point where a claim stops being editable and starts being evidence. Once submitted, the claim locks—no changing the amount, the category or the date after the fact—and the system stamps it with a reference number and a timestamp. That matters more than it sounds. If HMRC or an auditor ever asks what was claimed and when, you need a record that hasn’t been quietly amended since.
Good software makes this the moment the audit trail actually begins, not just a button the employee clicks to make the claim disappear from their to-do list. It protects the employee too; once an approver’s looked at the figures, nobody can go back and adjust them.
Stage four: how approval routing is actually configured
“Multi level approval workflow” appears on every vendor site and means very little on its own. These are the seven settings that decide whether the workflow survives contact with a real company.
| ** Rule ** | ** What it does ** | ** What happens without it ** |
|
Value thresholds
|
Adds an approver above a stated amount, for example a second signature above £2,500.
|
Either everything goes to a director, or nothing does. Both fail an audit.
|
|
Delegation
|
Lets an approver nominate a deputy with the same authority for a stated period.
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Approvers share logins during holidays. The audit trail is then a lie.
|
|
Out-of-office
|
Auto-reroutes on a date range rather than waiting for a manual handover.
|
Claims stall for two weeks in August and employees fund the company.
|
|
Escalation timer
|
Moves a claim up a level after a set number of working days.
|
Nothing ever expires. Ageing sits in a report nobody opens.
|
|
Self-approval block
|
Prevents anyone approving their own claim, including a director whose manager field is empty.
|
The most senior spenders have no control over them at all.
|
|
Segregation of duties
|
Keeps the approve permission and the release payment permission on different people.
|
One person can create, approve and pay. That’s the classic fraud pattern.
|
|
Split detection
|
Tests the running total per claimant per period, not the single claim value.
|
Thresholds get walked around by submitting three small claims instead of one large one.
|
Approval routing should be driven by the person’s position in the organisation structure, not a hard-coded name. When someone changes manager, the routing needs to change with them, without an administrator having to edit a workflow by hand. If a demo
can’t
show you that, ask why not.
Card reconciliation and the unmatched queue
Card transactions follow the same stage, but the mechanics are different enough to need their own look.
| ** Signal ** | ** How reliable ** | ** Why it breaks ** |
|
Exact amount
|
Strong
|
Tips added after the receipt printed, and pre-authorisations that settle at a different figure.
|
|
Transaction date
|
Moderate
|
Receipt date is the purchase, feed date is the settlement, and they can differ by three days.
|
|
Merchant name
|
Weak on its own
|
The descriptor is often a payment processor or a holding company, not the trading name on the receipt.
|
|
Card last four digits
|
Strong for ownership
|
Tells you whose card it was, not which receipt belongs to it.
|
|
Currency and foreign amount
|
Strong when present
|
The feed shows sterling after conversion, the receipt shows the original currency.
|
What matters is what the system does when it can’t find a match. An unmatched transaction needs an owner, an age, and an automatic chase to the cardholder — and unmatched receipts need the same treatment in reverse. Capture Expense flags unmatched transactions for review and sends reminders to the cardholder automatically, which is the behaviour to look for. If a demo can’t show you the unmatched queue, ask again, because that queue is where your month-end actually lives.
The consequences of leaving it unresolved are concrete. The money has already left the account. Without the receipt you can’t reclaim the VAT, you can’t prove the spend was for business, and at year-end the auditor asks a question you can’t answer.
Stage five: the VAT determination
Whether you can reclaim VAT on an employee expense depends almost entirely on what document you hold. HMRC’s rules are specific, and banded by value.
** What evidence you need to reclaim VAT, by value of supply **
| ** Value of supply ** | ** What you must hold ** | ** VAT shown separately? ** | ** Source ** |
|
£25 or less
|
No receipt required if you can show the supplier is VAT registered. A concession, not a policy.
|
No
|
HMRC GfC8, employee expenses
|
|
£250 or less including VAT
|
A simplified (less detailed) VAT invoice: supplier name, address and VAT number, time of supply, description, gross total per VAT rate, and the rate applied.
|
No, gross plus the rate is enough
|
HMRC VATREC16042
|
|
Over £250 including VAT
|
A full VAT invoice, which must name your business as the customer.
|
Yes
|
VAT Notice 700
|
|
Mileage allowance
|
Fuel VAT receipts covering at least the fuel element of the miles claimed, with the fuel element derived from the advisory fuel rate.
|
Yes, on the fuel receipt
|
VAT Notice 700/64, sections 9.8 and 9.10
|
Stage six: from approved to money in the account
Approval isn’t payment, and the gap between them is where your people lose patience. There are two routes.
** Through payroll **
Approved claims are exported to the payroll system and paid alongside salary, against a non-taxable payment element. It’s administratively simple and costs nothing extra, but the timing can be brutal—a claim approved the day after payroll cut-off waits until the following month. Being part of the same group as a payroll provider means Capture Expense treats this as a first-class route rather than a CSV afterthought.
** Direct by Bacs **
The system generates a payment file which finance releases to the bank. Bacs settles on a three-working-day cycle, so the practical turnaround from approval is about four working days. The reimbursements page covers both routes.
What one claim becomes in your accounts
This is the part that decides whether your finance team
actually likes
the software. Every approved claim
has to
become a journal entry that your accounting system accepts without a human retyping it.
Here’s
what that entry
actually contains
for the five claim types in the walkthrough above.
| ** Claim ** | ** Debit ** | ** Credit ** | ** Tax treatment ** | ** Clears when ** |
|
Mileage, 120 miles at 55p, £66.00
|
Motor and travel £62.60 / VAT input tax £3.40
|
Employee creditor £66.00
|
VAT on the fuel element only, at the 17p advisory rate for a 1600cc to 2000cc petrol car
|
On the payment run
|
|
Subsistence, evening meal, £22.00
|
Subsistence £18.33 / VAT input tax £3.67
|
Employee creditor £22.00
|
Standard rated. A simplified invoice is sufficient at £250 or less
|
On the payment run
|
|
Company card, hotel, £186.40
|
Accommodation £155.33 / VAT input tax £31.07
|
Card control account £186.40
|
Standard rated, but only against the hotel’s own VAT invoice
|
Immediately. The cash has already left
|
|
Taxi, unregistered operator, £34.50
|
Travel £34.50 / No VAT line
|
Employee creditor £34.50
|
No VAT charged, so none to reclaim
|
On the payment run
|
|
Client dinner, €140 at 1.17, £119.66
|
Client entertaining £119.66
|
Employee creditor £119.66
|
No UK input tax. Foreign VAT isn’t recoverable on a UK return
|
On the payment run, with any rate difference to exchange differences
|
Three things follow from reading that table properly.
-
The employee creditor account is a control account. It should sit at zero once every approved claim’s been paid, and the balance on it at any moment is exactly what your staff are owed. If your expense system can’t tell you that number, it isn’t integrated—it’s exporting.
-
The card control account works the other way. The card feed credits it when the transaction posts; coding the claim debits the expense and clears it. A growing balance on that account is a direct measure of how many card transactions have no receipt against them.
-
The export format is the thing to test in a trial. A journal needs the expense account code, cost centre, project or job code where you use one, the tax code, the net and VAT split, the transaction date, and a reference that lets you get back to the original receipt image from the accounting system. Ask to see a real export file, not a screenshot of a dashboard. Our page on integrations covers the connection side, and the post on syncing expenses with accounting systems covers what to check.
Expense software without the questions
None of this changes the basic shape of the process. Expense management happens whether or not you buy software for it—the only question is whether it runs in seconds on a phone, or drags out across an inbox, a spreadsheet, and a filing cabinet for weeks. The six stages covered above are the same regardless of provider. What differs is whether each one is properly built out, or just implied on a features page.
Capture Expense is built around exactly those points because they’re the ones that end up costing finance teams time later on. If it’d help to see how the six stages run against your own data, book a demo to see how it works in practice!
Frequently asked questions
How does expense management software work?
It captures an expense at source—from a photographed receipt, a mileage entry or a company card feed. It codes the item against your expense categories and tests it against your policy. It routes the claim to the right approver based on value and reporting line. Finance then checks the evidence and the VAT position, the employee’s paid through payroll or by Bacs, and a coded journal posts into your accounting system.
What is the expense reimbursement process?
Submission, approval, finance review, payment, posting. In practice the elapsed time is four to eight working days if you pay by Bacs, and anything from five to thirty five days if you pay through payroll, because the claim has to catch the next payroll cut off.
How does an expense approval workflow actually get set up?
You define who approves what by value band and by reporting line, then add the settings that keep it working: delegation, out of office rerouting, an escalation timer, a block on self approval, separation between the approver and the person who releases payment, and a rule that detects a large claim split into small ones.
Can you reclaim VAT on an expense claim without a receipt?
Only in narrow circumstances. HMRC’s guidelines for compliance allow a claim on supplies of £25 or less where you can show the supplier is VAT registered. Above that you need a simplified VAT invoice up to £250 including VAT, and a full VAT invoice naming your business above £250.
How does expense software handle company credit card transactions?
The transaction arrives from a card feed or Open Banking connection before any claim exists. The cardholder attaches the receipt, and the system matches the pair on amount, date and merchant. Unmatched items go into a queue with an owner and an age, and the cardholder’s chased until a receipt appears or the item’s written off.
Does expense software calculate mileage at the right HMRC rate?
It should. The approved rate for cars and vans rose to 55p per mile for the first 10,000 business miles from 6 April 2026, the first change since 2011–12, with 25p above 10,000 miles and 5p per passenger. Note that the gov.uk rates and thresholds page for employers shows 45p, because that’s the National Insurance figure—the 55p tax rate is on the business travel mileage page.
What does expense software send to the accounting system?
A journal, not a report. It should carry the expense account code, cost centre, project code, tax code, the net and VAT split, the transaction date, and a reference back to the receipt image. The employee creditor account it credits should clear to zero once claims are paid.
Is a photo of a receipt enough for HMRC?
Yes, for VAT purposes. VAT Notice 700/21 confirms that where an image is retained and contains all the detail required, the original invoice doesn’t need to be kept. The same notice states that cut and paste isn’t an acceptable digital link, which is what invalidates the photo, spreadsheet, retype workflow.
Related reading
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