A Guide to Expenses
What are expenses?
Expenses are the out-of-pocket payments paid out by staff, volunteers and trustees for work-related items required in order to do the work, e.g. bus fares, small items of stationery, stamps, travel etc.
Who can claim expenses?
It is very important to have a policy for expenses; the committee should approve the policy and issue it. The policy should attempt to eliminate inconsistency in what expenses are paid to whom. If there are permanent, salaried staff then their employment contract will make it clear where their normal place of work is. This could be their home or a specific location. This is important for personal and business tax liability – always expect the policy and its application to be subject to inspection by the tax authorities.
Volunteers and management committee members can claim expenses for travel to and from their home to the workplace and for carrying out the organisation's work.
Staff can claim expenses for travel from their normal place of work to carry out the organisation's work, but they cannot claim for the costs of their home to office journeys.
The policy should state what the organisation is prepared to pay and secondly point out the appropriate tax implications.
How to claim expenses
An expense form for claims helps people correctly claim what is due. Travel claims should always provide details of where the journey was from and to; receipts should be kept and stapled to the back of the expenses form. The form should always be authorised by an appropriate person e.g. line manager; volunteer organiser; for Trustees it should be the most senior, or the Treasurer, or another officer of the organisation. Expenses forms should be sent in for payment monthly.
By definition, volunteers are not paid for their time. Volunteers are legally able to claim reimbursement for travel and other reasonable expenses while volunteering for an organisation, and should be encouraged to do so.
You must only pay expenses that are reimbursements for actual amounts spent and not round-sum or flat-rate payments, otherwise the Inland Revenue may classify the payment as income and therefore subject to taxation which the organisation would be responsible for paying.
Any payments made over and above the published tax authority rates would be considered either as taxable benefits, or as part of the employee's salary, and would therefore be liable for tax.
For further information on expenses and mileage rates refer to HM Revenue & Customs website
