Employee Expenses now Tracked by Software

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.

The results revealed errors and abuses including:

* 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.

* 'Home workers' in several companies claiming 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.

* Duplicate claims, which had been paid without query.

* 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(tm), 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.

"One company that took part has a turnover of about £40m a year and profits of £4m, and it spends £400,000 on expenses. It's just a black hole and companies who don't have a monitoring system generally don't know what they're paying for.

"I saw a claim put in within another organisation for a train and tube fare of £354, but the employer in question does not ask staff for any information on where they were going or why. The claim was paid in full.

"Some companies allow claimants to put mileage, hotels and lunches all into one monthly figure, but they should have to itemise the elements of each trip separately."

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."

Ms Briggs was at pains to point out that the software picks up genuine errors as well as fraudulent claims. She had found a mileage claim of her own that was 100 miles higher than that claimed by three other staff, who had all driven to the same location