ECH10035 - Employer Support Team: Dispensations - Introduction

A dispensation must be given where an employer satisfies HMRC that there is no tax due on expenses or benefits paid or provided to employees or directors.

The advantages of a dispensation are

• to an employer is that the items covered by the dispensation do not have to be returned on form P11D.
• to an employee is that they do not need to include on their income tax returns and is not included in assessments or their PAYE coding.
• to HMRC - fewer forms P11D need to be processed.

Before a dispensation can be issued the person paying the expenses or providing the benefit has to apply

• using a P11DX, or
• by writing to explain the circumstances in which payments of a particular sort are made, or what benefits are being provided

Where form 64-8 is held the application may be accepted in writing from the appointed agent.

The EST will

• deal with all unprompted dispensation applications from employers
• deal with referrals from compliance officers (ECR308) following a compliance check
• review all existing dispensations in accordance with ECH10070 and
• provide advice to HMRC staff and employers on dispensations.

When dealing with a dispensation application or review of the dispensation the Employer Support Team must check ECS and other systems to

• Identify whether there is an appointed CRM/CM
• Identify whether there is a CPTT interest ( ECH10090)
• identify an open EC compliance check by another team and
• must liaise with the CRM/CM /CPTT/caseworker before continuing.

In addition the EST must consider the impacts any changes may have on the customer who may need to amend

• expenses procedures
• employee guidance and training
• accounting procedures
• reporting procedures

and consider with the customer an appropriate date on/by which any change will come into effect.

There is no requirement for a PAYE scheme to be opened where a company is set up which will never pay earnings, and which, in advance of providing benefits or paying expenses, agrees a dispensation with HMRC.

Where an application for a dispensation is made in these circumstances a request should be made for a ‘pseudo’ employer’s record in accordance with PAYE20070.

Guidance on dispensations is contained in this chapter and in the Employment Income Manual at EIM30051 onwards.