A dispensation is a notice granted by HM Revenue & Customs (HMRC) that removes the requirement to report expenses and benefits at the end of the year on forms P11D or P9D by a business or organisation. There is no need to pay any tax or National Insurance on items covered by a dispensation.
Dispensations last indefinitely but HMRC does review them every few years to make sure that the conditions under which they were issued still apply.
The main expenses normally covered by a dispensation are:
- travel and subsistence costs
- fuel for company cars
- car hire costs
- telephone costs
- business entertainment expenses
- credit cards used for business
- fees and subscriptions
In order to gain a dispensation you need to have a system in place for checking and authorising expenses claims. At a minimum, this means having someone other than the employee claiming the expenses check that:
- the amount claimed isn’t excessive
- the claim doesn’t include disallowable items
If it is not possible for you to operate an independent system for checking and authorising expenses claims due to insufficient staff numbers then you will only be able to get a dispensation if you:
- ensure all expenses claims are supported by receipts for the expenditure
- demonstrate that the claim relates to expenditure that can be covered by a dispensation
The easiest way to claim is to use HMRC’s online form, but you can also apply by post.
For more information on our P11D services contact Robin Mead on 0800 018 0590 or by email to email@example.com.