What You Need to Know About the Reimbursement of Expenses

When it comes to the reimbursement of expenses, we know there’s a lot to cover. That’s why we’ve compiled a list of some of the most frequently asked questions (and some that are more niche).  

Are you ready to learn all about the reimbursement of expenses in the UK?

Here we go.

What does the reimbursement of expenses mean?

Reimbursable expenses are costs that employees incur on behalf of the company while performing their job duties, which the company agrees to pay back. These typically include travel expenses, meals, lodging, and other necessary expenditures directly related to work tasks.

For example, if you travel abroad for a business meeting, the costs of your flight and hotel stay would be reimbursed by your company. 

Do reimbursed expenses count as income? 

In most cases, reimbursed expenses are not considered taxable income. This means that if your employer reimburses you for business-related expenses, you generally don’t need to include those amounts in your taxable income. 

For example, if you’re a salesperson who frequently travels to meet clients. Imagine you spend £150 on train tickets for your latest trip. Since the travel expense was wholly, exclusively, and necessarily incurred in the performance of your job, you won’t have to pay tax on the £150 reimbursement. 

How to reimburse employees for expenses?

Depending on the size and structure of your company, your reimbursement method might vary. Here’s an easy five-step process to help make sure your employees’ expense claims are always legitimate and reimbursed promptly.  

1. Create a clear expense policy

Start by establishing a well-defined expense policy. This should outline what expenses are eligible for reimbursement, the required documentation, and submission deadlines. Make this policy easily accessible to all employees.

2. Make it simple for employees to submit an expense claim

Use detailed expense policy templates that simplify the submission process. Employees should be able to easily fill out necessary details and attach receipts without hassle.

3. Automate where possible

Leverage expense management software to automate the approval and reimbursement process. This helps minimise errors, speeds up processing times, and ensures consistency.

4. Choose a method of reimbursement

Decide how reimbursements will be made. Options include direct bank transfers, payroll additions, or cash in hand payments. Choose a method that’s most convenient for both your company and your employees.

5. Maintain records

Proper record-keeping is essential. Store all submitted forms, receipts, and approval records securely. This ensures compliance with your internal audits and HMRC. Accurate and up-to-date records will help resolve any disputes that may arise.  

More on record keeping coming next. 

How to record reimbursed expenses

Similarly to the previous answer, depending on the size and workflow of your business, the way you decide to record your reimbursed expenses may differ.

Here are five straightforward steps to help you make sure once an expense has been reimbursed it doesn’t get lost:

1. Gather all relevant documentation: collect digital receipts, invoices, or other proof of the expense (with justifications if required). 
2. Categorise the expenses: group them by type (e.g., travel, meals, office equipment). 
3. Record in your accounting system or expense management platform: note the date, description, and amount of each expense. 
4. Reconcile with bank statements: ensure your records match your bank account. 
5. Prepare a summary: create a report of all reimbursed expenses for tax and financial purposes. 

With a sophisticated platform like Capture Expense, once the expense has been logged, it does all the heavy lifting for you. You can even use Capture Expense’s ‘Ask James’ feature to provide you with fully customisable reports based on your data, in real time. 

How do I invoice a customer for reimbursable expenses? 

To invoice a customer for reimbursable expenses you should:

1. Create a detailed invoice: list each expense, its cost, and any applicable taxes. 
2. Attach supporting documents: include copies of receipts or invoices. 
3. Specify payment terms: clearly state when the payment is due. 
4. Send the invoice: email or mail the invoice to the customer. Include your payment terms at the bottom of the invoice. 
5. Follow up: if payment is not received on time, send a reminder. 

Do employers have to reimburse travel expenses? 

Yes, employers generally have to reimburse employees for reasonable travel expenses incurred on their behalf. 

However, there are some exceptions:

• Daily travel: generally, the costs incurred for commuting from home to the workplace aren’t reimbursed, as they fall under the employee’s personal expenses. 
• Corporate guidelines: certain companies may implement specific rules about reimbursing travel expenses. Be sure to review your organisation’s policies before you submit a travel expense. 

What are some other expenses that employers reimburse?

In addition to travel expenses, employers often reimburse a variety of other expenses that employees might incur while performing their duties.

Common reimbursements include:

• Training and development: expenses related to professional development, such as courses, workshops, or conferences, may be covered to enhance employee skills and knowledge. 
• Work-related supplies: employers typically reimburse costs for supplies necessary for an employee’s job, including tools, software, or other materials required to complete tasks effectively. 
• Remote work expenses: with the rise of remote work, many employers now reimburse costs associated with home office setups, such as internet service, electricity, and office furniture. 

Can a trustee be reimbursed for expenses? 

Absolutely, trustees can be reimbursed for expenses incurred while fulfilling their duties. It’s imperative that trustees maintain transparency and documentation of these expenses, as they’re often responsible for managing the assets and operations of the trust.  

Common reimbursable expenses may include travel costs for attending meetings, legal or professional service fees, and costs related to the administration of the trust.

Can an employer refuse to reimburse expenses?

Yes, an employer can refuse to reimburse expenses under certain circumstances. 

While there is an implied term in employment contracts that employers will reimburse employees for reasonable business expenses, this obligation isn’t absolute. Employers are legally entitled to refuse the reimbursement of expenses if: 

• The expenses aren’t reasonable: if the expenses are deemed excessive or extravagant, they may not be eligible for reimbursement. 
• The expenses aren’t necessary for the job: expenses that aren’t directly related to the employee’s job duties may not be reimbursable. 
• The employee hasn’t complied with company policy: if the employee has failed to follow the company’s expense reimbursement policy, the employer may refuse reimbursement. 
• The expense is specifically excluded in the employment contract: if the employment contract explicitly states that certain expenses won’t be reimbursed, the employer can enforce this provision. 

Can an employer withhold expense reimbursement? 

Yes, in certain situations, an employer has the right to withhold expense reimbursements. Here are a few scenarios where this might occur: 

• Insufficient or incorrect documentation: if an employee doesn’t submit the required paperwork to substantiate their expense claim, the employer may choose to withhold reimbursement.  
• Unreasonable or excessive expenses: should the expenses be considered excessive or unjustified, the employer may partially or fully deny reimbursement.  
• Breach of company policy: if an employee doesn’t adhere to the company’s reimbursement guidelines, the employer is entitled to withhold the reimbursement. 

Do you have a question of your own about the reimbursement of expenses? 

Whatever your question, big or small, we are all ears. More importantly, we’re confident that Capture Expense has the solution. Book a personalised demo today to see how we can help.