Self-employed contractors: there's more to reimbursing professional expenses than expense claims

By Axelle Drack • Approved by Charlène Serayet

Published: 17 October 2024

Travel expenses, buying raw materials for a customer: when you're a self-employed entrepreneur, you sometimes have a lot of business expenses to run your business. So you need to be reimbursed... how? By making an expense claim?

There is an alternative (legal, needless to say) that allows you to deduct certain expenses from your turnover: disbursements. It may be the first time you've heard the word, but one thing's for sure: you'll soon fall in love with them once you understand the benefits they can bring you.

Find out everything there is to know about the subject in this article co-written with Charlène Serayet, Managing Director of Dasmind and an expert in administrative management.

See all software Expense Management

In a nutshell: what is an expense claim?

An expense claim is a document formalising a request for reimbursement of business expenses incurred by an individual in the course of his or her work.

The expense claim can be drawn up in physical or electronic form and sent to the company's accounting and administrative department, which defines the form of the expense claim in advance to ensure greater uniformity.

Generally, it is validated beforehand by the manager, who checks that the ceiling has been respected and that the type of expense is eligible for reimbursement.

Are you allowed to make an expense claim when you're a self-employed contractor?

NO (sorry, it's true that it's a bit frontal). Why not? The answer is almost in the question itself, but we'll give you a hint: it's your tax system's fault. Don't cry scandal, you chose it!

Time to review the basics of the self-employed entrepreneur tax regime

While the micro-business system has a number of advantages, such as the ease with which you can set up your business and the simplicity of accounting, it does have a few limitations. Nobody's perfect!

In fact, all types of business can deduct charges from their turnover... except for micro-businesses (out of luck). As a self-employed entrepreneur :

you are taxed on your turnover,
whereas other businesses are taxed on their profits, in other words on their turnover after deduction of expenses (but have much more stringent accounting rules than you do).

The ultra-simplified accounting that you lucky people benefit from is made possible by the application of a flat-rate deduction precisely to make it easier to take professional expenses into account. So you are not taxed on 100% of your turnover.

This flat-rate allowance varies according to the nature of your business:

purchase and resale of goods and merchandise: 71
BIC scheme (industrial and commercial profits): 50%.
BNC scheme (non-commercial profits): 34%.

So you can 't deduct your expenses on an actual basis, i.e. deduct the business expenses you actually incur from your turnover.

So it doesn't look good for you to be able to write off your business expenses as expenses. But the good news is that you still have an alternative way of getting your business expenses reimbursed properly: disbursement expenses.

The technique for reimbursing business expenses: out-of-pocket expenses

What are out-of-pocket expenses?

As a self-employed entrepreneur, you may have to pay expenses in advance to be able to provide a service or make a sale. These are usually materials or raw materials.

Here are some examples of outlay costs

tiles for work on a flat,
oil for an oil change,
a subscription to an image bank, etc.

You can deduct these types of costs from your turnover, for the simple reason that they are excluded from your tax base under article 267 of the General Tax Code.

But let's be clear: disbursement costs are not an opportunity to make a profit (we saw you coming). The amount of disbursement costs must be strictly equal to the amount of costs incurred.

❌ Here are some examples of costs that cannot be considered disbursement costs:

postage costs,
mileage costs
travel expenses
catering costs, etc.

💡 Good to know: you can be reimbursed for travel expenses if the invoices are made on behalf of your client. Generally speaking, this is possible with most expenses as long as they are necessary to carry out the service for your client.

A word from the expert

In other words, the disbursement costs are actually invoices in your client's name, paid by you, and which the client will reimburse to you directly. There is, however, one aspect to bear in mind: you will certainly be able to deduct business expenses from your tax bill, which is not normally the case for your scheme. However, you will not be able to apply a margin to these purchases.

If you work in the building trade, the tiles you buy for €5 will be paid for by the customer for €5, so you won't be able to charge him €15 in the hope of making a margin.

Advantage of out-of-pocket expenses over rebilling

In the duel between deducting out-of-pocket expenses and re-invoicing costs incurred, out-of-pocket expenses are the clear winner. Here's why:

They are excluded from your overall turnover, so you won't be taxed on them. On the other hand, re-invoicing expenses to your customers will increase your turnover, and with it the amount of your social security contributions. There is even a risk that you will exceed the turnover ceilings under which you can operate under this status.
They exclude your liability for purchases. If, for example, tiles that you have bought for work turn out to be faulty, your customer will have to turn to the supplier, not you.

Let's get down to the nitty-gritty: how do you get reimbursed for professional expenses if you're self-employed?

1. Obtain the customer's prior written agreement

To begin with, you need to obtain your customer's agreement in writing. This document is called an expense mandate.

As well as serving as proof in the event of a dispute with the customer at a later date, this agreement formalises for each purchase :

its nature
and the maximum budget planned.

Only once you have obtained this written agreement can you make your purchase.

2. Pay expenses using your business account

To ensure that the out-of-pocket expenses reimbursement process can continue, remember to pay for your purchase using only your business bank account.

3. Ask for an invoice in your customer's name

When you make the purchase in question, you should ask for the invoice to be made out in the customer's name, not yours.

Like all invoices, it should include a number of details:

customer's name
address
SIRET number
VAT number, etc.

4. Keep the receipts

It is essential to keep all proof of the purchase in question. Your customer will only be able to reimburse you for out-of-pocket expenses on presentation of the invoice and/or till receipt.

You should also bear in mind that you may be subject to inspection by the tax authorities in the future.

5. Issue an invoice to the customer after the service has been provided

Once the service has been provided, you should show the disbursement costs separately when you invoice your customer. You should enclose a copy of the receipt.

The amount reimbursed for out-of-pocket expenses must be strictly equal to the amount you paid to advance the costs. As we mentioned earlier, it is not possible to make a profit on out-of-pocket expenses.

Here is an example of a disbursement note:

Tools that make it easier to reimburse your expense claims

There is software that makes managing and reimbursing your expense claims much easier. There are many of them on the market, and they come in a variety of forms:

Human Resources (HR) software,
Estimating and invoicing software,
Accounting software,
Expense claim software.

They all have the basic functionality of expense claim management:

Entering expense claims
Receipt management
Reimbursement requests
Reimbursement validation
Payment management
Expense archiving.

But there are software packages that offer even more advanced, customised functions.