New flexibility for dispensations
Some of the work required in completing the annual returns of expenses and benefits for each employee (forms P11D) can be eliminated if you have a dispensation from HM Revenue & Customs (HMRC) to omit tax deductible expense payments. Also, where a dispensation is in place, the employees’ PAYE codes will not include expenses for which they can claim a tax deduction, so the accuracy of PAYE codes will be improved.
HMRC will readily grant dispensations for one-person companies, even where no independent person is available to check the expense claims, as long as the following conditions are met:
All the expenses incurred are supported by receipts.
The claims do not include disallowable items.
All the amounts claimed are reasonable.
In addition, all receipts and supporting information must also be retained for at least six years.
If the expense claims include items that are not supported by receipts, such as where HMRC authorised mileage rates are used to calculate mileage paid for use of a private car, HMRC insists that an independent person checks and authorises each claim. We could do this checking for you. You can apply for a dispensation online through the HMRC website, or by using the paper form P11DX.