- Dispensations
- PAYE Settlement Agreements (PSAs)
Dispensations
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.
On this page:
- What is a dispensation?
- What items can and can’t be covered by a dispensation?
- Systems you must have in place
- How to apply
- More useful links
What is a dispensation?
A dispensation is a notice from HM Revenue & Customs (HMRC) that removes the requirement to report expenses and benefits to them at the end of the year on forms P11D or P9D. There is also no need to pay any tax or NICs on items covered by a dispensation.
Once granted, dispensations last indefinitely. But HMRC reviews them from time to time (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. 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.
Go to the expenses and benefits A to Z
Systems you must have in place
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 amount claimed isn’t excessive
- the claim doesn’t include disallowable items
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:
- ensure all expenses claims are supported by receipts for the expenditure
- demonstrate that the claim relates to expenditure that can be covered by a dispensation – your receipts may be sufficient for this purpose, but if not you must retain additional information
How to apply
To apply for a dispensation, complete and send form P11DX to HMRC. This asks for information about the expenses and benefits you provide to your employees.
You can apply for a dispensation at any time. In general, dispensations take effect from the date on which HMRC issues them. However, theymay agree with you to have your dispensation take effect from the beginning of the tax year in which you apply for it.
Go to form P11DX to apply for a dispensation
More useful links
Expenses and benefits: the basics
Expenses and benefits record keeping
