Your company has an expense policy↗ that sets the rules. But rules alone don't get employees their money back. An expense reimbursement policy covers the other half: how employees submit claims, how quickly they get repaid, and what the process looks like from receipt to bank transfer.
Without a clear reimbursement process, even the best expense policy falls apart. Claims pile up, finance teams chase missing receipts, and employees wonder when (or if) they will be paid back.
This guide walks you through how to set up an expense reimbursement policy step by step, with real examples, a free template, and practical advice for UK businesses.
What is a reimbursable expense?
A reimbursable expense is any out-of-pocket↗ cost an employee pays personally for a legitimate business purpose. The categories your company reimburses should be defined in your expense policy↗. The most common ones include:
- Travel: Flights, trains, taxis, mileage, and accommodation
- Meals and entertainment: Client lunches, team dinners, conference meals
- Office supplies: Stationery, printer ink, small equipment
- Technology: Software subscriptions, phone bills (if used for work)
- Professional development: Course fees, conference tickets, books
- Remote work costs: Home office equipment, internet contributions
The key word is "business purpose." A coffee during a client meeting? Reimbursable. A coffee on your morning commute? Probably not. Your policy should draw these lines clearly.
How the expense reimbursement process works
The reimbursement process is the operational backbone of your expense policy. It answers the question every employee cares about: how do I get my money back? Here is what a well-designed process covers.
Roles and responsibilities
Make it clear who does what in the expense reimbursement process:
- Employees: Submit accurate expense claims with valid receipts within the deadline. Only claim expenses that fall within the policy.
- Managers: Review and approve or reject claims for their direct reports. Flag anything that looks unusual.
- Finance team: Process approved reimbursements, reconcile expenses against budgets, and ensure tax compliance.
- HR: Communicate the policy to new joiners and run refresher training when the policy is updated.
When everyone knows their role, claims move through the system faster and with fewer bottlenecks.
Receipt and documentation requirements
Specify what counts as valid documentation. Most companies require:
- An itemised receipt (not just a credit card statement)
- The date, vendor name, and amount
- A brief description of the business purpose
Digital receipts↗ and photos are standard now. If you use expense management software like Moss with OCR↗ (optical character recognition), employees can simply snap a photo and the details are extracted automatically.
Submission deadlines and reimbursement timelines
Set a clear deadline for submitting expense claims, such as within 30 days of the expense. Then commit to a reimbursement timeline, for example, within 14 business days of approval.
Clear reimbursement timelines prevent the "when am I getting paid back?" emails that clog up your finance team's inbox.
Choosing a reimbursement method
There are a few ways to handle expense reimbursement, and the method you choose affects how quickly employees get paid:
- Direct bank transfer: A widely used method. Employees submit claims, and approved amounts are transferred to their bank account.
- Payroll integration: Reimbursements are added to the next payslip. Simpler for payroll, but slower for employees.
- Corporate cards: Employees use company cards instead of personal money. This reduces the need for reimbursement altogether.
Many companies use a mix. Corporate cards for regular expenses, and reimbursement for one-off out-of-pocket↗ costs.
How to set up your expense reimbursement policy (step by step)
If you already have an expense policy↗ with defined categories and spending limits, you are halfway there. These steps focus on building the reimbursement process on top of it.
Step 1: Map your expense categories to your accounting system
Start by listing every type of expense your employees currently claim. Review the past six months of submissions to spot patterns. Then organise them into clear categories.
Map each category to your chart of accounts↗ and assign relevant cost centres↗ so expenses flow correctly into your accounting system.
- Travel: Flights, trains, taxis, mileage
- Accommodation: Hotels, serviced apartments
- Meals: Client meals, working lunches
- Office Supplies: Stationery, small equipment
- Technology: Software, phone costs
- Professional Development: Courses, conferences
Step 2: Set per diem rates and mileage allowances
For each category, set maximum amounts. You can use per diem rates (fixed daily allowances) for travel and meals, or set per-item caps.
Tip: HMRC publishes benchmark rates for subsistence and mileage↗. Using these makes your policy simpler and keeps you compliant. For example, HMRC's approved mileage rate for cars is 45p per mile for the first 10,000 miles, then 25p after that. Not sure what per diem rates to set? Use the Moss per diem calculator↗ to find the right daily allowances for your team's travel destinations.
Step 3: Define the approval workflow
Decide who approves what, and at which amounts. A typical structure looks like this:
- Under £500: Direct manager approves
- £500 to £2,000: Department head approves
- Over £2,000: Finance director or CFO approves
Keep the process as simple as possible. Every extra approval step adds delay and frustration.
Step 4: Choose your reimbursement method and timeline
Decide how employees will be paid back and how quickly. Be specific. "Reimbursements will be processed within 14 business days of approval via direct bank transfer" is far better than "reimbursements will be processed promptly."
If you use payroll integration, tell employees which pay cycle their claim will land in. If you use bank transfers, confirm whether reimbursements are processed daily, weekly, or on a set schedule.
Step 5: Roll out and communicate the policy
A policy only works if people know about it. When you launch your expense reimbursement policy:
- Share it widely. Post it on your intranet, include it in the employee handbook, and email it to all staff.
- Run a short training session. Walk employees through the submission process and answer questions.
- Make it easy to find. Employees should be able to access the policy in under 30 seconds.
- Set a review date. Plan to revisit the policy at least once a year.
Expense reimbursement policy examples
Seeing how other businesses structure their reimbursement processes makes it easier to build your own. Here are three examples tailored to different company sizes.
Small business example
Company: 15-employee marketing agency
Reimbursement process:
- All business expenses reimbursed within 10 working days via bank transfer
- Spending cap: £50 per meal, £100 per hotel night
- Receipts required for anything over £10
- All claims approved by the office manager
- Submissions due within 14 days of the expense
What works: Simple, one-step approval with a fast reimbursement turnaround. No unnecessary bureaucracy for a small team.
Mid-market / corporate example
Company: 200-employee SaaS company
Reimbursement process:
- Expenses categorised by cost centre↗ and department budget
- Tiered approval: managers up to £250, directors up to £1,000, CFO above £1,000
- Per diem rates for travel: £45/day for meals (UK), £65/day (international)
- Digital receipt submission required within 7 days
- Reimbursement via payroll within the next pay cycle
- Quarterly policy review by finance team
What works: Structured enough to control spending across departments, but still straightforward for employees. Payroll integration means no separate payment runs.
Travel and entertainment expense reimbursement example
Company: 80-employee consulting firm with frequent client travel
Reimbursement process:
- Economy flights only (business class requires CFO approval for flights over 6 hours)
- Hotel: up to £175/night in London, £120/night elsewhere in the UK
- Mileage: HMRC approved rate (45p/mile for first 10,000 miles)
- Client entertainment: up to £50 per person, with client name and business purpose required
- Travel expense reimbursement processed weekly every Friday
- International travel requires pre-approval and a travel expense reimbursement form before booking
What works: Detailed enough for frequent travellers, with specific rules for client-facing entertainment costs. Weekly payment runs mean employees are never waiting long.
UK tax rules for reimbursed expenses
HMRC has clear guidelines on which expenses can be reimbursed tax-free. The key principle: the expense must be incurred "wholly, exclusively, and necessarily" in the performance of the employee's duties.
Tax-free reimbursements include:
- Business travel (but not ordinary commuting)
- Subsistence (meals and accommodation during business travel). Use a per diem calculator↗ to check the right rates for each destination.
- Professional subscriptions
- Mileage at or below HMRC approved rates
If you reimburse above HMRC's benchmark rates, the excess is treated as a taxable benefit and must be reported on the employee's P11D.
Tip: Using HMRC's published rates simplifies everything. You do not need to collect detailed itemised meal receipts for subsistence if you use the approved scale rates. However, employers must still verify the employee was on a qualifying business journey and that a genuine subsistence expense was incurred.
VAT reclaim on employee expenses
Your business can reclaim VAT↗ on employee expenses, but you generally need valid VAT receipts. A credit card statement alone is not sufficient for most claims. However, HMRC allows you to reclaim VAT on supplies of £25 or less without a receipt, provided you can show the supplier is VAT-registered. For occasional low-value purchases, HMRC may also accept alternative evidence such as a bank or credit card statement.
To reclaim VAT, you need:
- A VAT receipt showing the supplier's VAT registration number
- Ideally, the receipt should be addressed to the company, though HMRC accepts receipts in the employee's name provided the cost was genuinely borne by the business
- The expense must relate to business activities
This is where digital receipt capture becomes especially valuable. Every lost receipt is lost VAT↗ recovery. Over a year, this can add up to thousands of pounds.
Common expense reimbursement mistakes to avoid
Even with a solid expense policy↗ in place, the reimbursement process itself can break down. Watch out for these pitfalls:
- No clear reimbursement timeline. If employees do not know when they will be paid back, trust erodes. Commit to a specific number of business days and stick to it.
- Making the submission process too complicated. If it takes 20 minutes to submit a £5 receipt, employees will stop claiming. Or worse, they will batch everything and submit three months of expenses at once.
- Not enforcing deadlines consistently. If senior staff get exceptions but junior employees do not, resentment builds quickly.
- Forgetting about remote workers. With more people working from home, your policy should address remote work expense reimbursement, including things like internet costs, office furniture, and co-working space fees.
- Ignoring VAT recovery. Every expense without a proper VAT receipt is money left on the table. Build VAT-compliant receipt collection into your process from the start.
- Relying on manual processes at scale. Spreadsheets and email chains work for five employees. They fall apart at 50. Automate receipt capture, approval routing, and payment processing before your team outgrows the manual approach.
Free expense reimbursement policy template
Writing a policy from scratch takes time. Moss offers a free expense policy generator↗ that builds a customised, downloadable PDF in minutes. Here is how it works:
- Answer a few questions about your company, location, and how you want people to spend.
- Select your expense categories like travel, meals, events, software, or whatever applies to your business.
- Customise and generate your policy with AI. Edit any section manually, then download the finished document as a PDF.
Every section is fully editable, so you stay in control of the final wording. The tool does not store your data. You generate, review, and download everything in one session.
Generate your free expense policy↗
Once you have your policy document, use the step-by-step process above to build the reimbursement workflow around it: define roles, set submission deadlines, choose your payment method, and communicate the process to your team.
Setting up a clear expense reimbursement process saves your finance team hours every month and gives employees confidence that they will be paid back fairly and promptly. Pair it with your expense policy↗ and expense management software like Moss, and you can automate the entire journey from receipt capture to approval to reimbursement.
