A dispensation is a notice from HM Revenue & Customs (HMRC) that removes the requirement to report certain expenses and benefits on the end of year forms P11D (and P9D exceptionally). It also removes the requirement for employees to submit claims for tax relief on the expenses received.
The main expenses usually covered by a dispensation are:
In order to claim for a dispensation the company must have an independent system in place for checking and authorising expense claims. The minimum that someone other than the claimant would check are that the claim is not excessive and does not include any non-business items. However, it is possible for a ‘one man (sole director) company’ to obtain a dispensation if they ensure all expense claims are supported by receipts and demonstrate that the claim relates to expenditure which is able to be covered by a dispensation.
You can apply online or by post by completing form P11D(x). You indicate which expenses you would like to have a dispensation for on the form. It follows that you can only claim for a dispensation for those types of expenses which can be covered by one.
Once agreed by HMRC a dispensation is for an indefinite period although HMRC will usually review the dispensation within five years to ensure the conditions under which it was originally issued still apply. If you fail to notify HMRC that the authorisation procedures are no longer in place then they can revoke the dispensation and collect the tax that should have been deducted from any of the payments to employers.
If you would like to discuss dispensations further or would like any assistance with applying for a dispensation please do not hesitate to contact Linda Warner or Mark Hibberd.
