I was recently taken back when a friend of mine told me they had been having problems with their in-house Payroll Department. HMRC written to my friend with a £2200 tax bill for underpaid tax and NIC. Quite distraught my friend looked to Griffin Payroll Services for some advice. It became evident that a dispensation had not been applied for business incurred expenses and that thousands of pounds of expenses had been added to his P11d that was unnecessary.
If a 2nd telephone line is provided in your home by your employer and paid for by your employer there is no need to report this as an expenses.
There are a number of expenses that you can apply for a dispensation for that allows certain expenses not to be reported to HMRC using a P11d. Please see the HMRC web site.
Once the notice has been granted, dispensations last indefinitely. However, HMRC reviews them regularly up to five year intervals or less.
The main expenses routinely covered by a dispensation are:
- hire car costs
- business entertainment expenses
- credit cards used for business
- fuel for company cars
- travel, including subsistence costs associated with business travel
- fees and subscriptions
What systems do you need in place?
You must have an independent person checking the expenses other than the employee themselves. This is to make sure that all expenses and benefits claimed show:
- the amount claimed is within the company’s policy and HMRC guidelines.
- The claim does not include disallowable items.
Sometimes it is not possible for an independent person to check the expenses as they may be the sole director and employee of the Company. If so then please ensure receipts for the expenditure are retained and can demonstrate that the expense relates to a business expenditure covered by the dispensation.
How to claim for a dispensation
It’s very important that you have checked which expenses can be included in a dispensation before you start to complete the online application, as you can’t save your progress once you’ve started and return to it at a later time.
For more information or advice on how to apply for a dispensation contact Lisa at Griffin Payroll