A Dispensation is a notice from HM Revenue & Customs (HMRC) that removes the requirement for the employer to report certain expenses and benefits at the end of the tax year on forms P11D or P9D. There will be no requirement to pay any tax or National Insurance Contributions on items covered by a Dispensation. It also removes the requirement for employees to submit claims for deductions against expenses previously reported on forms P11D or P9D.
You have apply to HMRC for a Dispensation for any expenses incurred by you or your employees which are business related. This will cut down on your paperwork in filling out a P11D form. A Dispensation might include some or all of the following:
- travel, including subsistence costs associated with business travel
- fuel for company cars
- hire car costs
- business entertainment expenses
- credit cards used for business
- fees and subscriptions
HMRC will expect you to have an independent system in place for checking and authorising expenses claims. This means having someone other than the employee claiming the expenses to check that the:
- amount claimed isn't excessive
- claim doesn't include disallowable items
If it is not possible for you to operate an independent system for checking and authorising expenses claims - for example, because you are the sole director of your company and you have no other employees - you will only be able to obtain 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 - your receipts may be sufficient for this purpose, but if not you must retain additional information
We have been successful in applying for Dispensations as we can monitor expense claims impartially.