Any money paid by an employer to an employee must be reported via the payroll or a P11D, or P9. A Dispensation is a notice from HMRC that removes the requirement for an employer to report certain expenses and benefits at the end of the tax year on a P11D or P9. It also removes the requirement for employees to submit claims for deductions against expenses reported on forms P11D or P9D.
A Dispensation can take effect from the start of the tax year in which the application is made, so for 2014/15 you need to make yours before no later than 5th April 2015. You can freely download Form P11Dx Dispensation for Expense Payments & Benefits in Kind on our website here http://kentpayrollbureau.co.uk/free-forms/
Tax and National Insurance Contributions does not have to be paid on items covered by a Dispensation.
Once granted Dispensations last indefinitely. However, HMRC reviews them regularly (usually at intervals of five years or less) to make sure that the conditions under which they were issued still apply.
What items can and can’t be covered by a dispensation?
You can apply to HMRC for a dispensation to cover expenses or benefits for which your employee gets a full tax deduction. This includes many routine business expenses and benefits (e.g. reimbursement of out-of-pocket expenses).
The main expenses routinely covered by a dispensation are:
• 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
To find out whether an individual item can or can’t be included in a Dispensation, see the expenses and benefits A to Z list here http://www.hmrc.gov.uk/payerti/exb/a-z/index.htm
If there is no reference to dispensations in the item’s A to Z entry, it means the item can’t be included in a dispensation.