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Expense Fraud – How to protect your business

What policies are already in place to tackle expense fraud?

The government has proposed a new bill that is currently in the committee stage at the House of Lords. The ‘Economic Crime and Corporate Transparency Bill’, aims to hold companies accountable if they profit from fraud perpetrated by their employees. While some steps are in place to penalise and prosecute businesses and their employees for fraud, the goal is to close gaps that previously permitted businesses to evade accountability.

According to the new law, if a specific fraud violation is committed by an employee for the benefit of the organisation and the company does not have effective fraud prevention policies in place, the organisation will be held accountable. It is not necessary to show that company owners authorised or were aware of the fraud. Therefore, it is essential that businesses implement a well-controlled and managed system to help mitigate any penalties HMRC may levy.

Moreover, HMRC has recently increased its focus on understanding what controls businesses have introduced to limit the likelihood of fraud and error occurring. Changes to accounting regulations, HMRC risk ratings and a requirement for sign-off from senior accounting officers all mean there is now greater pressure to account for every penny that passes through the books.

A well-controlled and managed system will help mitigate any penalties that HMRC may levy, as any payments to employees that are unaccounted for could be classed as either pay or a benefit-in-kind, both of which are subject to tax and national insurance contributions as well as possible interest.

How to safeguard against expense fraud

Expense fraud is not always deliberate. Employees may not be aware of the company’s expense policy, or it may be because of an accounting error. However, by starting with a strong policy communicated to all employees, conducting regular reviews and random spot checks, you can help control expense claims and mitigate fraudulent activity.

authors:lee-knight,authors:susan-ball