Widespread abuses, errors and lax procedures which can lay employers open to massive tax bills and lost profits, according to a survey of blue chip companies and government agencies by Software Europe.

It found that UK businesses currently spend £3.1bn a year on employee expenses. The survey results indicate that 4.91% of all travel and entertainment claims are fraudulent, putting the cost of fraudulent claims to UK business at more than £151.5 million.

It found common abuses included: Inflated and inconsistent mileage claims, duplicate claims which had been paid without query, and meal allowances claimed when meals were not work-related.

Software Europe operations manager Adele Briggs says: "Inconsistencies don't show up or are not remembered when line managers sign off expense claim forms, but when you put them on a database they stick out like a sore thumb.

"And if managers do not insist on employees stating where they have been, and why, they fail to protect their company from very nasty, unexpected and unwelcome tax demands."

One company admitted to being hit by a £150,000 tax bill because expenses claimed by employees were so lacking in detail. Claims contained no explanations of where staff had been or what they had done to justify the cash, so the Inland Revenue classed them as benefits in kind and charged the company accordingly.