Staff Expense Policy Template for UK Limited Companies

What an expense policy must cover

An expense policy sets out which categories of expenditure the company will reimburse, the limits that apply within each category, the evidence required to claim, and the process for submission and approval. Without a written policy, employees may claim expenses in good faith that are not tax-deductible for the company or that attract a benefit-in-kind liability on the employee's personal tax. A clear policy prevents both outcomes.

• Business travel — mileage, rail, air, taxi, parking
• Subsistence — meals and accommodation when away overnight on business
• Client entertainment — limits, prior approval required above threshold
• Home working — equipment and broadband, if applicable
• Training and professional subscriptions
• Out-of-scope categories (personal items, fines, alcohol above limit)

Mileage and travel limits

For employees using personal vehicles on company business, HMRC's Approved Mileage Allowance Payment (AMAP) rates allow reimbursement at 45p per mile for the first 10,000 miles per tax year, and 25p per mile thereafter, without a P11D liability. Reimbursing above these rates creates a taxable benefit on the excess. Reimbursing below these rates allows the employee to claim Mileage Allowance Relief through their self-assessment return.

For rail and air travel, the policy should specify the booking channel to be used (to enable pre-approval and cost control), the class permitted for different journey lengths, and whether the employee may book last-minute or must give a minimum notice period. Hotel nightly limits vary significantly by city — a single national figure is rarely workable; consider London, other UK cities, and overseas as separate tiers.

Approval thresholds and submission process

Define who can approve expenses at different values: for example, line manager approval up to £250 per claim, finance director approval for claims between £250 and £1,000, and board approval for claims above that threshold. All claims by directors should be approved by another director or the board, not self-approved.

Specify the submission window — claims submitted more than thirty or sixty days after the expense was incurred are harder to reconcile and may indicate that the receipt has been lost or the expense is questionable. A clear cut-off date (for example, claims must be submitted within thirty days of the month in which the expense was incurred) is enforceable and fair.

Client entertainment — the compliance boundary

Client entertainment is not deductible for corporation tax purposes and is not reclaimable for VAT in most circumstances. The policy should be explicit on this point so that employees understand that entertaining a client is a legitimate business activity but one that the company carries at a cost. Where entertainment is approved, require prior authorisation above a modest threshold and retain evidence of who attended, the business purpose, and the cost.

Staff entertaining (such as a team dinner or Christmas party) is treated differently — up to £150 per head per tax year qualifies for tax exemption under the annual party exemption. The policy should distinguish clearly between the two categories to avoid confusion at the point of claim.