In order for a reimbursed expense to be treated as an exempt payment, an employer needs to put himself in the position of the employee. The employer then needs to decide whether that expense would have qualified for full tax relief to the employee. There is no explicit requirement in law for a checking system, but to an employer will have to operate a checking system.
An employer should consider the following:
- setting out a corporate policy of which type of expenses are reimbursable and the need for those expenses to be reasonable
- requiring the completion of a standard expense claim forms
- the need for any expense claim to be supported by a receipt
- making checks on expense claims
- requiring a senior person to authorise the claims
Receipts are required as it is expected that HMRC will expect for a checking system. And also, that there is evidence an expense has actually been incurred by the employee.