Expenses: Is Your Policy Abuse-proof?

Peninsula Team

June 03 2009

Derailing the Gravy Train

Remember, the Peninsula TaxWise Advice Service is available to help guide you through all areas of tax law. Just call us on 01455 852555 and we can advise the best course of action for you.

A subject dear to most people's hearts at the moment, unless they are an MP, is expenses. With the common cry currently being bandied around Parliament of "it's in the rules" it's worth having a look at your business expenses policy to make sure that it clearly identifies what constitutes legitimate expenses and also review your checking methods to ensure that there are no fraudulent claims.

Sadly, abuse of the expenses system wherever one exists is a well known problem. Expenses are often seen as a way of supplementing income as well as determined attempts to disprove the statement that "there's no such thing as a free lunch."

An expenses policy should set out what it is intended to cover so that employees are aware of the spirit of the rules. It should be made clear that it is designed to cover actual expenses not a secondary income. On that basis, there should be clear rules as to what expenses can be reclaimed and the circumstances in which those claims are valid.

No purchases should be repaid without an itemised receipt showing both the time and date of any transaction. There should also be a clear purchasing policy to set out what items, and to what value, items can be purchased without authorisation. A policy should also set out if items need to be requisitioned and purchased centrally. If individual employees want to buy an item at a higher specification than the company will approve then that individual will need to pay the difference.

Expenses should be separately approved and scrutinised. Checks should not merely be on the individual expenses but also on the overall pattern and volume. There should be a general idea of what the expenses should be and a track should be kept to see if any individual is claiming an amount that is significantly above the expected level or is consistently above the average. A check should also be made to see how often an approved item is being claimed to see if there is an unusually high requirement for replacement.

Monitoring expenses is always a sensitive area because companies want to trust their staff and employees don't like feeling that their integrity is being questioned. It is important to remember that the vast majority of employees don't abuse the expenses policy and give to the company far more than they reclaim. As with all things, it is the few who act dishonestly that discredit the whole.

Companies need to make clear that deliberately making false expense claims is fraud and will be treated accordingly. Any issues of potential fraud will be treated as potentially gross misconduct and the Police may be involved due to the criminal nature of the offence. Genuine errors in claims could be resolved by repaying any monies mistakenly claimed and potentially disciplinary warnings depending on the circumstances. However, where there has been a deliberate attempt to defraud then this should always be considered as potentially gross misconduct, irrespective of the amount.

In order to ensure that there are no misunderstandings the expenses claim form should require the employee to sign and date the claim and there should be a statement above the signature which confirms that, in signing the form, the individual is stating that this is a true and accurate record of the expenses and that they are aware that any false claims will be viewed as potential fraud. In this way, by signing the form the individual is acknowledging their personal responsibility to ensure that the claim is correct to the best of their knowledge.

If you want to discuss your expenses policy in more detail, or would like advice implementing one into your business, just call the Peninsula TaxWise Advice Service on 01455 852555.

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