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Warning Comes Following Probe Into MPs’ Expense Claims

A lax attitude to employee expenses could damage your bottom line, warns the Institute of Payroll Professionals (IPP), the UK’s leading membership body for individuals working in payroll.

Expense management is a hot topic at the moment, and one which has been thrust firmly into the spotlight following the much publicised review of MPs’ expense claims and benefits. But its not just politicians that are in the hot seat over their expense habits.

At a time when business profits are coming under severe pressure, ensuring corporate expense policies are followed by the book is something that could have a big effect on a company’s bottom line.

Yet, claims the IPP, many employers are unnecessarily throwing away money due to poor administrative practices and a lack of knowledge about expense management. Indeed it is believed that only a fraction of claims that should be rejected are actually thrown out.

To cut down on errors relating to expenses and personal benefit, organisations need to make sure that payroll administrators are properly trained and conversant with the latest HMRC legislation and tax implications.

Lindsay Melvin, CEO of the IPP, says: “There’s only one thing worse than paying too much in expenses and that’s paying for things because of oversight and poor administration!

“Companies and organisations need to take this issue more seriously and ensure payroll staff are fully conversant in all areas regarding expense management. Unfortunately those organisations that have paid lip service to this aspect of their business accounting are now finding themselves in the media spotlight.”

To ensure payable expenses are calculated accurately, it is imperative that payroll administrators understand the latest legislation and the correct process for expense management.

Genuine business expenses, in which employees are able to claim tax relief, are those that are incurred “wholly, exclusively and necessarily in the performance of the duties of the employment”. In other words they have to be relevant to the employee’s job.

The scope of this tends to be limited: commuting from home to the office does not meet the test, nor does heating and lighting for a home office, unless you are self-employed. However, professional subscriptions paid by employees or deductions for business mileage, based on the HMRC’s mileage rates, do qualify.

To ensure business expenses are above board and to prevent penalties from HMRC, it is important that companies are able to certify employees’ expenses via claim forms in which they declare that the expenses were incurred as part of their professional duties.

Any company seeking advice on expense management should consult the IPP for guidance and further information. Please visit www.payrollprofession.org.

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Written by PayPerShop.com - or reproduced on behalf of the company supplying the above information.

Filed under: Press Releases on May 23rd, 2009

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