FSN: Software Europe suggest widespread expense claims abuse

Software Europe suggest widespread expense claims abuse

29th January 2007
A new survey into expenses claims put in by employees of blue chip companies and Government agencies has revealed widespread abuses, errors and lax procedures which can lay employers open to massive tax bills and lost profits.

One company admitted to being hit by a £150,000 tax bill because expenses claimed by employees were so lacking in detail. Claims contained no explanations of where staff had been or what they had done to justify the cash, so the Inland Revenue classed them as benefits in kind and charged the company accordingly.

The survey, by computer software company Software Europe, was based on data gathered throughout last year (2006) from organisations which had filed detailed information about the way expenses were claimed and awarded.

UK Businesses currently spend £3.1 billion a year on employee expenses. The 958 survey responses indicate that 4.91% of all travel and entertainment claims are fraudulent, putting the cost of fraudulent claims to UK business at more than £151.5 million.

Common abuses included, inflated and inconsistent mileage claims, with staff claiming different distances for the same journeys, or different distances from one week to the next. One claim for 1800 miles was paid, even though the claim should have read 180 miles. In another case, ‘Home workers' claimed up to 120 journeys a year to head office, out of approximately 200 working days. Such attendance figures mean they no longer qualify as home workers, so income from claimed expenses is taxable as a benefit in kind. Another frequent problem was meal allowances claimed when meals were not work-related, or claimed for attending a course where meals were provided.

Software Europe Operations Manager Adele Briggs said organisations were vulnerable to overpayment and tax liabilities because most expenses were still claimed weekly or monthly on paper forms, and many were far too vague: “Inconsistencies don't show up or are not remembered when line managers sign off expense claim forms, but when you put them on a database such as the one we've developed ourselves, expenses™, they stick out like a sore thumb.

“And if managers do not insist on employees stating where they have been, and why, they fail to protect their company from very nasty, unexpected and unwelcome tax demands.”

Ms Briggs, 33, said expenses were “a big ticket item” in terms of costs but were not under control in most companies or agencies. Only line managers checked their validity, “and all too often they don't check, they just authorise payment.

Ms Briggs says Software Europe has followed its own advice. The Lincoln-based company used its own software to check on mileage claims by staff, with immediate cost savings: “Mileage claims have gone done about 20 per cent because staff don't ‘guestimate' any more. They know we're checking so they make sure their own figures are accurate.”

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