How Best to Manage Contractor Expenses
–This article was last updated on 25 March 2022-
If your company regularly uses contractors at events or for particular services, then it is important that you manage their expenses effectively. Contractors are often given expenses benefits including food allowances and travel reimbursement, but these can be difficult to track. Failing to track these properly can lead to you failing to be HMRC compliant in some cases and can also allow abuses to occur. Here we explore how best to manage the contractor expenses for your company.
Set it Out Clearly
The most important element in managing expenses for contractors is to set the policy out clearly from the outset. Provide your contractors with written details in a trackable manner, such as by email, that tells them exactly what they can claim, how they can claim it and what they need to provide. If they fail to do this or do it incorrectly, then quite simply you just don’t pay them. Correct expenses claiming needs to rest with the claimant and the process for doing so should be immediately clear before they start the job.
Requiring evidence for expenses claims will help you to remain HMRC compliant and will also give you security from abuse. For each claim, you should require digital receipts that clearly show the details of the purchase for VAT purposes. The claimant should provide a VAT receipt in all cases and receipt scanning should be used to keep a clear digital record of this. Doing so will make it easier to process the claims and prevents the contractor from losing a receipt and being left unable to make a claim.
Use your Existing Systems
Your contractors should be brought into your existing systems for the purpose of making claims. Give them access to your cloud-based expense system and you will then be able to make the same checks on their claims as on your employees. Allowances can be changed for each individual so you can give them a bespoke set of claiming rights. By using your existing systems you will be able to use real-time reporting to keep track of expenses, look for anomalies and ensure you are always remaining HMRC compliant with the claims and payments.
Make Prompt Payment
Contractors can be invaluable for the company and should be protected as assets to the business. A part of this is to ensure that their valid expenses claims are dealt with promptly and paid within a reasonable timescale. If they are left waiting for payment, they will be far more likely to become dissatisfied and try to fiddle the system than if you pay promptly each time. Remember to keep them onside and they will engage better with your policies.
Your management of contractor expenses should operate very similarly to your employee expenses and should make use of the same systems. If you are clear about the policy and processes for claiming from the outset, then you can be very strict about payment and can keep control of the expenses at all times. Remember to pay your contractors promptly though and keep them onside with your company.