This guide explains how dispensations can remove the reporting requirements for certain expenses and benefits. It outlines the kinds of expense and benefit that can be included in a dispensation, and it also explains how to go about applying for one.
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A dispensation is a notice from HM Revenue & Customs (HMRC) that removes the requirement to report expenses and benefits at the end of the year on forms P11D or P9D. There is also no need to pay any tax or National Insurance contributions 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.
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. To find out whether an individual item can or can't be included in a dispensation, see the expenses and benefits A to Z - use the link at the end of this section.
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.
The main expenses routinely covered by a dispensation are:
Go to the expenses and benefits A to Z to check which items may be covered by a dispensation
Expenses and benefits: the basics
Expenses and benefits record keeping
You must have an independent system in place for checking and authorising expenses claims. At a minimum, this means having someone other than the employee claiming the expenses check that the:
If it is not possible for you to operate an independent system for checking and authorising expenses claims - for example, because you are the sole director of your company and you have no other employees - you will only be able to obtain a dispensation if you:
To apply for a dispensation you need to supply details of expenses and benefit payments to HMRC. There are two ways to do this, either using the online form, or the paper equivalent. The form asks about the following expenses:
There is also room on the form to tell HMRC about any other business related expenses you feel could be covered by a dispensation.
Use the A-Z to check which items, you pay or reimburse, may be covered by a dispensation.
You can apply for a dispensation at any time. In general, dispensations take effect from the date on which HMRC issue them. However, HMRC may agree your dispensation can take effect from the beginning of the tax year in which you applied for it if you were paying those expenses and making the benefit payments at that earlier date.
The easiest way to claim is to use HMRC's online form, but you can also apply by post. In either case, HMRC aims to respond within 15 working days.
Go to the expenses and benefits A to Z to check which items may be covered by a dispensation
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If the circumstances or arrangements for making these payments change you should advise HMRC. If you fail to do so HMRC can, in certain circumstances, revoke the dispensation and collect the tax that should have been deducted from the payments.
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.
Apply online for a dispensation
To apply by post you can download form P11D(X) 'Dispensation for expenses payments and benefits in kind', from HMRC’s website. You will need to print it before completing.
HMRC recommends that you download and print the form and you can also apply by letter, but you must include all the information requested on the form.
Send the application (form or letter) to:
HMRC
Local Compliance
Specialist Employer Compliance
Bowback House
299 Silbury Boulevard
Witan Gate West
Milton Keynes
Buckinghamshire
MK9 1NG
