What exactly is a dispensation?
A dispensation is a written agreement between a company and HMRC that relieves you from having to report expenses payments and benefits in kind on the annual form P11D, where HMRC are satisfied that no tax should be payable on them.
Why would I want a dispensation?
From the perspective of a small business owner, there are two reasons why you would want a dispensation.
Firstly – you will not have to go to the trouble of reporting staff expenses on a P11D
Secondly – you will not have to pay employers National insurance on these expense items, saving you money.
What expense items are included in a dispensation?
Expenses typically included in a dispensation are travel, hotel, subsistence expenses, stationery and other sundry items.
These items must be expenses that are incurred “wholly, exclusively and necessarily” in the employees work for the business.
In all cases, you should only reimburse legitimate business expenses for which you have receipts.
Note that a dispensation does not cover business mileage payments.
How do I apply for a dispensation?
To apply for a dispensation, either discuss with your accountant, or see the HMRC website – www.hmrc.gov.uk/forms/p11dx.pdf
The above is just a rough guide intended for education purposes – If you want to provide a perk to a member of staff, please seek professional advice from your accountant or see the HMRC web site for detailed guidance.
Tax Returns Epping – Transform Accounting – Tax Return Essex
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