We routinely get a dispensation in place for our payroll clients. This is a notice from HMRC that removes the requirement for the employer to report certain expenses at the end of the tax year on forms P11D or P9D.
In order to have the dispensation in place HMRC require that your company has systems in place to check that expense claims. This means that your company must have an independent system in place for checking and authorising expenses claims. As a minimum, your company should have someone other than the employee claiming the expenses check that the:
- amount claimed isn’t excessive
- 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 operate under 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