Dispensing with Dispensations
Prior to 6 April 2016 an employer could apply to HMRC for a dispensation from reporting some benefits in kind provided certain conditions were fulfilled. From 6 April 2016 it is no longer possible to apply for a dispensation and instead many expenses and benefits will be covered by ‘exemption’.
If you have an existing dispensation, the expenses covered by it should also be covered by the new exemption regime. You can apply to carry on using bespoke rates agreed with HMRC at any time between 6 April 2011 and 5 April 2016 as part of your dispensation but only for up to 5 years from the date they were agreed.
Exemptions apply only in relation to:-
- Payments of business expenses at a flat rate to your employee as part of their earnings at either a benchmark rate or a special (‘bespoke’) rate approved by HMRC;
- Reimbursement of employee’s actual business expense.
Business expenses are payments relating to:-
- Business travel;
- Phone bills;
- Business entertainment;
- Uniform and tools for work.
All other expenses and benefits paid for your employees need to be reported as normal. Nevertheless this should reduce reporting requirements significantly, which can only be helpful.
You do not need to apply for an exemption if you are paying HMRC’s benchmark rates for allowable expenses but you will need to apply if you want to pay bespoke rates. Any proposed bespoke rate must be supported by evidence that the rates in point are based on actual expenses.
You must have a system in place to check payments and ensure that your employees retain proof of expenses you make (receipts etc) and as was a requirement with the agreement of dispensations, you must have an appropriate system in place to check and approve expenses within your organisation.
Please contact Cathy Corns if you would like to arrange a no obligation meeting to discuss matters in connection with any corporate or business tax issues.
Date: 23rd February, 2017
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