Let’s start with an important clarification, the government does not pay your business for its travel expenses, what it does is to allow you to deduct travel expenses from your company’s profits. It’s an important distinction because it contradicts the widely held notion amongst employees, in all sectors, that travel expenses are somehow ‘free money’. Traditionally, travel expenses have not only been subject to abuse, they’ve also been the cause of endless, tedious and time-wasting tracking and collation by finance departments. Employees have either had to spend their own money or have been given a set allowance, and they have needed to retain all the receipts which confirm their expenditure. The HMRC website contains a comprehensive definition of what constitutes legitimate expenses. An employee’s daily commute to work, for example, is not an allowable expense: ‘something only counts as a business expense if your employee needs it to do their job.’ In relation to business travel, the most frequent, legitimate claims include, travel, food, lodging, visas and vaccinations.
Prepaid company credit cards are a fintech solution to the traditionally time consuming and haphazard process of managing employee travel expenses. A prepaid card is loaded with a sum of money, in any currency. Your employee can then use the card in the same way that they would use a conventional credit card, however there a number of features that make a prepaid card particularly useful in a business context. Prepaid credit cards are not linked directly to a bank account, so your company bank account is safe from hackers and thieves. The card is also extremely convenient for your employee, they no longer have to spend their own money, the simply photograph all evidence of expenditure and upload it via an app. For the employer, the beauty of the system is that you have a constant overview of expenditure. You can see what is being spent as it happens, you can adjust budgets, impose limits on spending headings, such as food, and you can close a card without the need to freeze an account.
A game changing piece of legislation that all businesses need to be aware of is the arrival of PSD2. This European legislation is already in operation, although the UK will not come into full compliance until March 2021. This legislation will allow merchants direct access to bank accounts, if they are given permission by the client. The legislation also embodies enhanced security requirements which will require two forms of customer identification. It is this Strong Customer Authentication (SCA) which is causing problems and has led to the FCA to delay UK implementation. Some Third-Party Providers will not be compliant with the legislation and therefore will be unable to operate. With the PSD2 deadline looming it is therefore important that if you are handling your employee travel expenses with a prepaid credit card system that you choose a credit card which is fully PSD2 compliant and which can integrate with your bank account.