Dispensations - a bit of clarity is required!

stefanboro

Hi Everyone,

For various reasons I need to know more about HMRC dispensations and would appreciate any general advice and guidance.

1. My basic understanding is that monies paid to employees for any expenses and benefits (whether taxable or not) must either be reported on P11D / P9D - or you can apply for a dispensation meaning no reporting requirements for those expenses and benefits which are not taxable - i.e. within HMRC guidlines and the limits provided by legislation. You obviously can't apply for a dispensation for something which is taxable I imagine. Is this essentially correct?

2. The only exception that I am aware of is that of milage allowance payments that are equal or under HMRC thresholds - you cannot apply for a dispensation for this. Does this then mean that you can pay this amount without reporting it via P11D/P9D? I have always known the answer to be yes but want to make sure!

3. My experience tell's me that HMRC aren't particularly bothered if a business is paying employees for legitimate expenses backed up by receipts but they haven't applied for a dispensation and aren't reporting these expenses via P11D / P9D - does anyone else agree with that?

Any response to any of these questions is massively appreciated! :thumbup1:

deanshepherd

1. Yes.

2. I have spoken to a payroll inspector before and he has wanted everything on the P11D, regardless of whether there is an exemption provided for in the legislation, unless it is included in a dispensation. That is why I always apply for a dispensation on all my clients.

3. I would agree that after a PAYE inspection HMRC are more concerned that things are done right moving forwards rather than trying to punish people for something that has no tax loss to the exchequer. Personally I prefer not to take the risk.

stefanboro

deanshepherd wrote: »

1. Yes.

2. I have spoken to a payroll inspector before and he has wanted everything on the P11D, regardless of whether there is an exemption provided for in the legislation, unless it is included in a dispensation. That is why I always apply for a dispensation on all my clients.

3. I would agree that after a PAYE inspection HMRC are more concerned that things are done right moving forwards rather than trying to punish people for something that has no tax loss to the exchequer. Personally I prefer not to take the risk.

Thanks very much for the response Dean, sincerely appreciated.

payrollpro

I would only take issue with one aspect of this and that is the mileage allowance. HMRC officers have no right to demand that mileage payments be P11D'd unless there is a dispensation. If the payments satisfy the AMAP rules and the journey is covered by the criteria laid down in 490 then it is exempt and the dispensation is irrelevant.

HMRC will not include travel costs in a dispensation so how can an officer take that view, all that does is force employers to put all travel onto the P11D on the grounds that HMRC won't allow a dispensation for it and therefore it has to be reported.

Whilst I fully appreciate the approach, Dean, after all we do need to be risk adverse, however I take issue with HMRC when they insist on something they have no right to insist on.

As an example, representatives on the HMRC forums, AAT included, took exception to HMRC's recent insistence that employers HAD to advise the accounts office if there was no PAYE payment to be made. There being no legislative right to insist on this they have now amended their communication to instead ask for employers to do so, if they don't mind.

This should generate some healthy debate!

Payrollpro

deanshepherd

payrollpro wrote: »

HMRC will not include travel costs in a dispensation..

Travel costs are the one thing they ALWAYS include in a dispensation, or have I misread your post?

The example that particularly springs to mind is the 'List 3' subscriptions. I have had HMRC insist they are put on a dispensation application or included on the P11D but I thought these were now included within the legislation?