Expense reports: simplified expense management with Expensya

An expense report refers to all expenses incurred by an employee within the context of their professional activity. Each employee has the right to request from their employer, the reimbursement of their business expenses. Expense reports can be in paper or digital format, and must meet several criteria to be eligible for reimbursement:

• The expense amount must comply with the company’s expense policy
• The expense must be incurred in the company’s interest and for work-related purposes
• The expense must be backed up with a receipt

The receipt is an essential document in the expense report reimbursement process; it proves the nature of an employee’s business expense. This document can be a payment receipt or an invoice and must contain all the useful data allowing for the reimbursement of the incurred expense, such as:

• Date
• Supplier’s name 
• Expense details
• VAT (in case the expense is subject to VAT)

The company is obligated to check that all expense reports are accompanied by a receipt to avoid a tax adjustment in the event of an audit.

When expense reports are digitized, the expense receipts originally drawn up in paper format, scanned and stored in the cloud, are eligible to justify the employee's expenses.

Expense reports must be itemized and formalized. Information may vary according to the employee’s expenses incurred on a business trip. In general, the data to integrate into an expense report is:

• The employee’s name
• The type of expense
• Details of the incurred costs
• The date
• The amount before and after tax
• The VAT amount

The employee has the option to declare different types of business expenses, which the employer must reimburse and respect, in accordance with the limits set out by URSSAF. As such, various types of expenses may be included in expense reports:

• Restoration costs: costs mainly corresponding to meal expenses (dinners, client invitations, etc.)
• Transport costs: costs relating to trains, buses, and cars may be reimbursed. If an employee uses their own vehicle for business-related endeavors, they will be reimbursed on a mileage expense-basis, according to the applicable tax rate schedule.
• Accommodation costs: costs corresponding to all expenses linked to the employee’s accommodations in the context of a business trip.
• Other costs: costs corresponding to purchase expenses that are necessary to carry out a professional assignment (equipment, remote work costs, etc.)

The employee has the option to declare different types of business expenses, which the employer must reimburse and respect, in accordance with the limits set out by the HMRC. As such, various types of expenses may be included in expense reports:

• Meal expenses: Expenses mainly corresponding to meal expenses (dinners, client invitations, etc.)
• Transportation expenses: Expenses relating to trains, buses, and cars may be reimbursed. If an employee uses their own vehicle for business-related endeavors, they will be reimbursed on a mileage expense-basis, according to the applicable tax rate schedule.
• Accommodation expenses: Expenses corresponding to all expenses linked to lodging during business trips.
• Other expenses: Expenses corresponding to purchases that are necessary to carry out a professional task. (equipment, remote work costs, etc.)

When an expense is reimbursed, HM Revenue and Customs (HMRC) must be satisfied that the expense is admissible for tax purposes, otherwise, the reimbursement from the employer is handled as an additional taxable income.

Travel and accommodation expenses are reimbursed by the employer. Travel and entertainment expenses are the second largest controllable expense and account for 8-12% of operating expenses.

Mileage Allowance Payments (MAPs) is what the employee is paid for using their personal vehicle for business-related journeys. Employers can pay their employees a certain amount of MAPs every year without having to report them to HMRC, this is known as an ‘approved amount’.

The ‘approved amount’ is calculated by multiplying the employee’s business travel miles for the year by the rate per mile for their vehicle. You can use HMRC’s  MAPs working sheet  to learn more.