Expenses policy template for UK employers: 16 clauses and the rule behind each

Written from primary sources · Editor-reviewed · Sources last read 27 September 2026

By the tmcmatch.co.uk editorial team · Published 27 September 2026 · Last reviewed 27 September 2026 · 9 min read

9 primary sources cited on this page. How we check what is on this site

An expenses policy decides more tax than most finance teams realise. Whether a payment has to be reported, whether its VAT can be reclaimed and whether an event is tax-free all depend on wording that usually sits in this document. The template below has sixteen clauses. Each one is written to be issued as it stands once the bracketed choices are filled in, and each is tied to the HMRC rule or section of legislation it relies on, so the reason for the wording survives the next rewrite.

Download the template

Download the expenses policy (.docx, 38 kB)

Free and editable. No form. The file is generated from the same text as this page.

The sixteen clauses, and why each is worded that way

Expenses policy clauses against HMRC guidance and legislation. [Bracketed] text is for you to choose.
Clause	Policy wording	The rule behind it
1. Scope	This policy applies to employees and directors of [Company] who incur expenses in the performance of their duties. [Contractors and guests are covered by section 12.]	Reimbursed expenses are exempt only where the employee could have claimed a deduction (s.289A ITEPA 2003). Source
2. Business travel and commuting	[Company] reimburses business travel. It does not reimburse ordinary commuting between home and a permanent workplace. A workplace attended for a continuous period likely to exceed 24 months is treated as permanent.	Ordinary commuting is not business travel (s.338); the 24-month rule is in s.339 and EIM32080. Source
3. How expenses are paid	Expenses are reimbursed at actual cost against receipts, or at the HMRC benchmark rates in section 5. [Company] does not pay flat allowances other than these.	To be exempt from reporting, payments must be at actual cost or at a benchmark or HMRC-approved rate. Source
4. Receipts and VAT invoices	Claims must include a receipt for each item. Where the supplier is VAT-registered, the receipt must be a VAT invoice unless the item cost £25 or less. Invoices may be in the employee’s name.	VAT Notice 700: no VAT invoice needed for some supplies of £25 or less; subsistence invoices may be made out to the employee. Source
5. Meals on UK business journeys	Where a qualifying journey lasts 5 hours or more, [Company] pays up to £5; 10 hours or more, up to £10; 15 hours or more and ongoing at 8pm, up to £25. [State whether you pay these as allowances or reimburse receipts up to these amounts.]	Income Tax (Approved Expenses) Regulations 2015 (SI 2015/1948), reg 2. Source
6. Overseas travel	For travel outside the UK, [Company] pays accommodation and subsistence at [actual cost / HMRC’s overseas scale rates for the city]. Where scale rates are used, the traveller must record the dates and purpose of each trip.	HMRC allows the overseas scale rates without receipts, but the employer must keep evidence of qualifying travel. Source
7. Hotels	Hotels are booked through [Company]’s travel supplier at up to [£X] a night in London and [£Y] elsewhere. Hotels booked outside the channel are reimbursed only with a VAT invoice.	VAT on hotels for employees on a business trip is reclaimable in full (Notice 700, 12.1.3). Source
8. Own car	Business miles in an employee’s own car are reimbursed at 55p a mile for the first 10,000 in the tax year and 25p after; 5p a mile per colleague carried. Claims must show the date, journey, purpose, miles, engine size and fuel type, with fuel receipts covering the fuel element.	Approved mileage rates (s.230 ITEPA); fuel receipts and records for VAT (Notice 700/64, 9.9–9.10). Source
9. Company cars	Business fuel for company cars is reimbursed at HMRC’s advisory fuel rate for the car’s fuel and engine size, current on the date of the journey.	Advisory fuel rates, reviewed quarterly by HMRC. Source
10. Rail and air	Rail and air are booked through [Company]’s travel supplier. [Standard class rail; economy for flights under [X] hours.]	Passenger transport is zero-rated for VAT; the class booked sets the Air Passenger Duty. Source
11. Entertaining	Client entertainment requires [manager] approval in advance and must be claimed separately from staff subsistence, with the names of those entertained.	Client entertainment is not deductible for corporation tax (CTA 2009 s.1298) and its VAT is blocked (Notice 700/65). Source
12. Staff events	The annual [Christmas party] is open to all staff and budgeted at no more than £150 a head, including VAT and any transport or accommodation provided for it.	Section 264 ITEPA: cost per head includes transport, accommodation and VAT. Source
13. Relocation	[Company] reimburses qualifying relocation costs against receipts up to £[amount]. Amounts above £8,000 are taxable.	Sections 271–287 ITEPA: £8,000 limit per move. Source
14. Approval and checking	Every claim is approved by someone other than the claimant. [Finance] checks a sample of claims each month against receipts and travel bookings.	GOV.UK: employees cannot check their own expenses; a checking system is a condition of the exemption. Source
15. Deadlines and records	Claims must be submitted within [30] days of the expense. Records are kept for at least 3 years after the end of the tax year.	GOV.UK: keep records for 3 years from the end of the tax year. Source
16. Taxable items	Anything reimbursed outside this policy is treated as taxable earnings and processed through payroll [or reported on form P11D].	Taxable expenses must be reported; payrolling becomes mandatory from 6 April 2027. Source

The three decisions that carry the most tax

1. Actual cost or benchmark rates — never an unapproved flat rate

The exemption from reporting depends on the method of payment, not on the item. GOV.UK sets out the two routes:

GOV.UK — Expenses and benefits for employers

paying a flat rate to your employee as part of their earnings - this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC paying back the employee’s actual costs

Read it on legislation.gov.uk

A “£30 a day” allowance that is neither an HMRC benchmark rate nor an approved bespoke rate is taxable earnings, however reasonable it looks. Clauses 3, 5 and 6 of the template are written to stay inside the two routes. The benchmark meal rates are on travel expenses and tax; the overseas rates are on overseas subsistence rates.

2. Receipts that also work for VAT

A receipt that proves the cost for income tax does not always support a VAT reclaim. VAT Notice 700 allows two concessions that clause 4 relies on: “the invoice can be made out to an employee for subsistence expenses mentioned in section 12.1”, and “you do not need a VAT invoice for some types of supply if your total expenditure for each taxable supply was £25 or less (including VAT).” But paying a flat rate removes the reclaim altogether: if “you pay an employee a flat rate for subsistence expenses cannot claim as input tax any VAT incurred on those expenses”. The full VAT picture for travel is on VAT on business travel and, for mileage, on VAT on mileage claims.

3. Someone else checks

The exemption comes with a condition that is easy to break in a small team. GOV.UK: “Your employees cannot check their own expenses.” For travel it also says what evidence to keep: “You reimburse an employee’s travel expenses - you’ll need to keep a record of when and why the employee travelled, and where possible keep receipts as evidence.” Clause 14 builds the second pair of eyes into the policy; clause 15 sets the record period.

Clauses that other templates leave out

Commuting (clause 2). Ordinary commuting is defined in s.338: ““ordinary commuting” means travel between—(a) the employee’s home and a permanent workplace, or (b) a place that is not a workplace and a permanent workplace.” Without this clause, the policy cannot say why a claim was refused.
Engine size and fuel type (clause 8). They decide the fuel element for VAT, so the claim form has to ask.
Party budget including travel (clause 12). Section 264 counts transport and accommodation provided for the event in the cost per head. See staff parties and client entertainment.
Relocation (clause 13). The £8,000 limit is per move. See relocation expenses.
What happens to everything else (clause 16). Taxable items will have to be payrolled from April 2027. See P11D and business travel.

Why this site has nothing to gain from your answer

We are paid a fixed fee per enquiry, agreed in advance, identical whichever supplier receives it. The template points bookings at a travel supplier in clauses 7 and 10 because booked travel arrives with the evidence clause 14 needs; it works equally well without one.

Want the booking side of this policy run for you?

Describe the requirement once. It goes to no more than three suppliers, once each.

How this fits with a travel policy

An expenses policy says how money is paid back. A travel policy says how trips are booked, who approves them and how travellers are looked after. The enforceable travel clauses — duty of care, monitoring, booking channel — are on corporate travel policy. Many organisations issue both as one document; if you do, keep the tax wording here unchanged.

The rates in this template are those in force on 2026-09-27. The mileage rate changed for 2026–27 and the advisory fuel rates change quarterly, so the template refers to “current” rates wherever it can. It is a starting point, not tax advice.

Common questions

What should an expenses policy include?

Who it covers; the line between business travel and commuting; how expenses are paid (actual cost or HMRC benchmark rates); receipts and VAT invoices; meal, overseas, hotel and mileage rules; entertaining; staff events; relocation; approval and checking; deadlines and record keeping; and what happens to anything outside it.

Do I have to use HMRC’s rates in an expenses policy?

No, but the tax consequences follow the rate. Payments at actual cost or at HMRC’s benchmark rates can be exempt from reporting; flat allowances at other rates are taxable unless HMRC has approved them as bespoke rates.

How long should expense records be kept?

At least 3 years from the end of the tax year: “You must keep records for 3 years from the end of the tax year they relate to.”

Can managers approve their own expenses?

They should not. GOV.UK: “Your employees cannot check their own expenses.”

Is the template free?

Yes. The Word file (38 kB) is free to download and edit with no form or sign-up.

What is the mileage rate for an expenses policy in 2026?

55p a mile for the first 10,000 business miles in the tax year and 25p after, for an employee’s own car or van, from 2026–27.

Sources cited on this page

Every figure above was read from the source it is attributed to on 20 September 2026. How we check this.