Business expenses

An overview of expense reimbursement

Gregoire Serre

Gregoire Serre

Financial analyst

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Keeping track of expenses and reimbursing employees when they cover work-related costs can be a real headache. A comprehensive understanding of expense reimbursements and tax-deductible expenses can help streamline the process and free you and your employees up to concentrate on the core of your business. Find out how Mooncard can help improve your expense reimbursement process today.


What are reimbursed expenses?



The question of reimbursed expenses arises when employees or self-employed workers cover a business-related expenditure out of their own pocket and have to be reimbursed by the business. 


According to HMRC, employees can claim any expenses that are considered “wholly and exclusively” for the purpose of the business. 


In most companies, the costs that can be considered as “reimbursable” are set out clearly in advance, in an expenses policy, so that employees know before they spend their money whether the expense is likely to be approved and reimbursed, and so that they can be held accountable for the expenses they generate. Streamlining this process is key to ensuring that reimbursing expenses isn’t a headache and the cornerstone of a happy workforce.



Examples of reimbursable expenses



The type of expenses that a company will reimburse will very much depend on the nature of the business and the employer’s expenses policy. Standard expenses which are reimbursed by most employers include things such as travel, accommodation, meals and office supplies, although employers and employees alike should be aware of the conditions around reclaiming any business-related expenses.



Travel expenses



Travel expenses make up by far the biggest proportion of expenses for most companies. This includes travel by air, train tickets, car hire, use of a personal vehicle, bicycles and more.


When an employee is obliged to travel for work-related reasons to another part of the country or even to another part of town, some kind of cost is automatically incurred. Whether it is the cost of a train or bus ticket, or whether the employee uses their own car, leading to wear and tear, there will be a cost somewhere, and these costs have to be refunded.


The important thing to remember when it comes to travel expenses is that the expense has to be “wholly and exclusively” for the purposes of work. So, if when driving to visit a client, the employee takes a detour to pick up ingredients for dinner that night, the journey is no longer exclusively business-related and would not qualify as a refundable expense.


You should also remember that the daily commute from the home to the usual place of work and is not an eligible business expense. However, when an employee’s usual place of work is their home, as is the case for many more employees now than a few years ago, they can be reimbursed for travel to another work location for the purposes of a meeting or training, for example. 






In some circumstances employees will be obliged to stay overnight away from their homes in the course of their work. Whether it is attending a conference, visiting suppliers, opening a new branch in another town, or taking part in a training course, often one day is not enough and staff will have to arrange overnight accommodation. 


Your business may have special arrangements with specific hotel chains, or local accommodation providers in towns your employees regularly visit, and in this case, employees may simply have an account and not need to pay out of their own pockets. However, often this is not the case, and the employee covers the cost before filing an expenses claim and being reimbursed at a later stage.


Generally speaking, the accommodation not only has to be business related but has to remain within “reasonable” limits. Bear in mind that your company finance manager might not look favourably on staff checking into a five-star penthouse when attending a health-and-safety training course when there is a perfectly adequate local hotel nearby.






If an employee has to be away from the usual place of work for more than a few hours, they will normally have to be fed and watered. Often they will pay for this out of their own pockets and file an expenses claim later.


Again, it should be borne in mind that the expense should be “reasonable”, which is unlikely to be the case of wining and dining at a Michelin-starred exclusive restaurant. It might be useful to bear in mind the HMRC “scale rate payments”, which set out the reasonable costs of eating out in the UK. These are as follows:


Minimum journey time Maximum meal allowance
5 hours £5
10 hours £10
15 hours (and ongoing at 8pm) £25


Many employers use these “scale rate payments” or meal allowances, as a way of covering staff meal costs without having to justify each and every expense. HMRC does recommend, however, keeping receipts in all cases.



Other expenses



The basic rule to follow for reimbursing all expenses is that they must be business related. If an employee has to nip out to buy printer cartridges when the printer runs out of ink, or coffee for the staff kitchen, these costs should be reimbursed.


Some employers go above and beyond the basic minimum and cover costs such as relocation costs, gym membership, private medical care, days out, and staff parties to boost staff morale and keep employees’ well-being at optimum levels. In some cases, however, these would not be considered as expenses to be reimbursed but would be automatically dealt with through the company benefits policy.


If staff are expected to wear a uniform and to keep it clean, you will probably want to consider introducing a clothing allowance, so they are not out of pocket as a result.



What information is need for an expense to be reimbursed?



When it comes to validating and reimbursing expenses, certain key information must be provided. Travel tickets are usually sufficient as they show the destination and date of the journey. However for everything else, a receipt has to be provided showing the nature of the expense, the amount, the seller’s identity and their VAT number where appropriate. For every reimbursable expense, a paper receipt must be kept and filed with the expenses claim.


Increasingly, advances in digital technology are taking over from dog-eared receipts and torn tickets. Now that everyone has a mobile phone almost permanently on them, employees can now take a photo of their receipts and file their expenses claims automatically, making the whole process easier.



Improving the expense reimbursement process



There are a number of advantages of spending time ensuring that you have a comprehensive expenses reimbursement policy in place. It helps employees know in advance what expenses are likely to be considered as valid, so minimises unwarranted costs and makes the management of expenses and related budgets much easier. 


A good policy also makes it easy for employees to file their expenses claims, making use of modern technology to avoid them having to keep pockets and bags full of paper receipts and spending valuable time each month organising them and remembering when they were made. There are a multitude of apps designed to make it easy to simply take a picture of a receipt and file the claim automatically with HR. Accounting software can then generate reports on employee expenditure and help you plan your budgets accordingly.


Obviously, when an expenses policy is working well and staff are aware of the eligible costs and how to ask for a reimbursement, then they are promptly refunded after they file their expenses claims.


However, no matter how streamlined the expenses process is and how quickly employees are reimbursed, no-one likes being out-of-pocket as a result of having to pay work-related expenses even for a day or two. The ideal, therefore, is to make sure that employees are never, or rarely, required to cover business expenses themselves.


Many employers opt to achieve this by issuing their staff with corporate expenses cards. Combined with a clear policy on the types of expenses that it can be used for, employees can use their corporate credit card to pay for transport, accommodation and subsistence, without dipping into their own pockets.






Dealing with expenses reimbursement can be the source of dissatisfaction among staff and can be the bane of an HR officer’s life. But it doesn’t need to be! By adopting a clear and comprehensive expenses policy, communicating its content to all staff, and using modern technology, the headaches of the past can be forgotten. A Mooncard corporate card can help make this a reality.

Find out more about how Mooncard can help you turn your expenses policy around by booking a demo today.

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Gregoire Serre

Gregoire Serre

Grégoire Serre has been a financial analyst at Mooncard since 2021. He previously worked at Ernest & Young and Heineken, gaining solid experience in the finance and audit sectors. He is passionate about economics, accounting and entrepreneurship.