Organisations must align expense processes to reduce policy breaches and regulatory risk ahead of new HMRC enforcement measures
As the UK increases its scrutiny of employee expenses and PAYE reporting, finance teams are under growing pressure to ensure their processes are accurate, consistent and audit-ready.
The new tax year in April typically brings renewed HMRC scrutiny on enforcement measures, but further steps are being taken towards real-time reporting of benefits ahead of mandatory implementation in 2027.
While these changes are primarily focused on the reporting of employee benefits such as private healthcare and gym memberships, they signal a broader shift towards more immediate and transparent employer reporting.
“Within the past few years, responding to inflation and navigating supply chain disruptions has highlighted the need for real-time visibility into spending,” said Richard Jones, VP Product at ExpenseIn.
“However, HMRC’s clampdown on real-time reporting is shifting greater responsibility onto businesses. For finance teams, reliance on siloed data and manual workflows is a compliance gamble that businesses cannot take. For organisations that wish to avoid penalties, robust internal controls are essential.”
Without real-time visibility and connected systems, Jones warns that maintaining HMRC compliance will be difficult.
“Policy breaches are not always elaborate fraud. They can be everyday oversights, such as incorrectly submitted costs or duplicate submissions. Changes in employee data, new starters, or role transitions can also create errors across systems, such as outdated permissions and misrouted approvals. These mistakes can quietly accumulate, creating compliance exposure and potential regulatory penalties.”
Many organisations still rely on manual, ‘after-the-fact’ checks, which slows the process and limits visibility.
“Finance teams need a clear view of spending as it happens, not weeks later. Without that, they’re forced to make decisions based on incomplete information. This approach is both a liability under HMRC scrutiny and a roadblock to efficiency.”
To address these challenges, Jones points to strong internal controls which can reduce compliance risks and soften administrative workloads.
“When expense policies are unclear, it invites such errors. Finance teams must clearly define approval requirements to catch non-compliant transactions early. This involves defining allowable expenses and conducting frequent policy reviews to reflect evolving regulations and business needs. Putting multiple sets of eyes on spending can help identify potential non-compliance.”
Jones continues, “Rather than relying on disconnected systems and manual handoffs, finance teams need a connected approach to expense management. By keeping employee data aligned with HR records and integrating with accountancy platforms, expense claims can be routed correctly from submission to approvals. This maintains cleaner reporting from the outset, giving finance teams cleaner data and visibility into spending with correctly coded expenses. As such, anomalies are spotted and the clear audit trail that regulators now demand is created.”
Jones concludes, “In uncertain economic conditions and evolving compliance standards, businesses must be able to evidence where every penny is going. Taking a proactive approach to compliance and implementing automated expense management can help organisations reduce non-compliant spending.”