Reimbursable vs. Non-Reimbursable Expenses Explained

The Fundamental Distinction

The distinction between reimbursable and non-reimbursable expenses is straightforward in principle: a reimbursable expense is one you incurred on behalf of the business that the business has agreed to pay back. A non-reimbursable expense is one that, for whatever reason, the business won't cover - either because it's personal, because it violates policy, because it wasn't pre-approved when required, or because it's simply outside the scope of what the business considers a legitimate business cost.

In practice, the line can be blurry, and the specific rules depend entirely on your company's expense policy and the tax rules in your jurisdiction. What's reimbursable varies significantly between businesses of different sizes, industries, and cultures. A startup might have an unlimited remote work equipment budget. A large corporation might require three quotes for any purchase over £200. Understanding the general principles - and the most common grey areas - helps you set sensible policies and make sensible decisions about specific expenses.

Commonly Reimbursable Expenses

Most businesses will reimburse expenses that fall into these categories:

• Business travel: Train, plane, and bus fares; mileage at the approved rate; parking; tolls; airport transfers - all when travelling for a business purpose
• Accommodation: Hotels or serviced apartments required for business travel away from the normal place of work, within the company's hotel rate cap
• Client-facing meals and entertainment: Meals with clients, prospects, or business partners where the primary purpose is business discussion
• Professional development: Courses, conferences, books, and training directly relevant to the employee's role
• Office supplies: Stationery, printer ink, small equipment purchased for business use
• Communications: Business phone calls, internet costs where used for business (typically the business proportion of a shared connection)
• Software and subscriptions: Tools, apps, and services required to do the job

Commonly Non-Reimbursable Expenses

These categories are frequently excluded from reimbursement, though specific company policies vary:

• Personal meals during normal working hours (you'd be eating regardless of whether you were working)
• Commuting costs between home and your regular place of work
• Personal clothing, even if worn to work (unless it's a uniform or specialist protective clothing)
• Personal entertainment - cinema, sporting events, activities not part of an approved business event
• Alcohol beyond a reasonable limit, or at events that are personal rather than business in nature
• Fines, penalties, or parking tickets (even if incurred while on business travel)
• First-class or business-class travel without specific pre-approval
• Hotel room charges that exceed the company's approved rate
• Expenses that were incurred without the required pre-approval

Related reading: how to set an expense policy for your team.

The Tax Dimension

From a tax perspective, the reimbursability question intersects with deductibility. An expense that is reimbursed to an employee must be "wholly, exclusively, and necessarily" incurred in the performance of their duties to be tax-free. Reimbursements that don't meet this test may be treated as taxable benefits - meaning the employee owes income tax on them and the employer owes employer NIC. This is why some personal expenses, even if reimbursed as a goodwill gesture, create tax liabilities for both parties.

Grey Areas and How to Handle Them

Many expenses fall into genuinely ambiguous territory. A meal with a friend who is also a business contact: was it a business meal or a social meal? A laptop purchased by a remote worker for home use: business equipment or personal asset? A phone used for both business calls and personal use: fully reimbursable or only partly? The general principle is that where an expense has both personal and business elements, only the genuine business proportion is reimbursable and deductible. Document the business purpose clearly at the time of the expense - the further you are from the event, the harder it is to reconstruct the reasoning credibly.

How Note.now Makes This Easy

Note.now lets you define your own reimbursable expense categories and flag submissions that fall outside policy for manager review. Employees can see which categories are eligible before they submit, reducing rejected claims. See also: how to manage employee expense claims. Explore expense management in Note.now, or get started free.