Many businesses have employees who are required to travel on business and who will subsequently be reimbursed for the expenses they incur. Those businesses need to make an annual report to HM Revenue & Customs (HMRC) on form P11D of all expenses reimbursed, and the employee then has to make a separate claim for tax relief by demonstrating that the expense was incurred wholly, necessarily, and exclusively as part of their duties and was not, for example, normal commuting expenses between home and work. This can be a lengthy and laborious process.
A dispensation is an agreement with HMRC that certain expenses, which are likely to qualify for full tax relief, do not have to be reported either on a P11D or a Self Assessment Return and that no separate claim for relief is necessary. This saves a considerable amount of time and administration. You can apply for a dispensation to cover any expenses for which your employees get a full tax deduction, not just for travel expenses. Once issued dispensations last indefinitely but are reviewed by HMRC periodically to ensure that the conditions under which they were issued still apply.
To be able to obtain a dispensation you need to apply to HMRC and must have certain systems in place for checking and authorising expense claims. At a minimum this means having someone other than the employee claiming the expense to check that the amount claimed is not excessive and does not include disallowable items. If a company wishes to include Directors within a dispensation then HMRC will need to be satisfied that claims are checked robustly and not just automatically authorised.
For further information please contact David Jenkins or complete the contact form below.