Every year, employers are required to prepare a form called a P11D for any employee who has received "benefits in kind" - company cars, medical insurance, that kind of thing.
However, in theory the employer is also supposed to include payments made to employees to reimburse them for expense claims - even if the claims were purely for legitimately incurred business expenses. The employee then has to make a separate claim to avoid being taxed on those amounts.
To avoid this fiasco, HMRC allow the employer to apply for something called a "dispensation" - it gives the employer permission not to include expense claims on the P11Ds. Expenses that a dispensation might cover could include:
- Travel
- Fuel for company cars
- Telephone calls
- Business entertainment expenses
- Credit cards used for business
Many employers don't apply for a dispensation, and so either a) they and their employees have to fill in needless paperwork or b) they omit the expenses from the P11Ds without permission, which may well come back and haunt them in the event of a PAYE inspection.
It's easy to apply for a dispensation, but to make it even easier HMRC are now allowing businesses to apply for PAYE dispensations online.
Making an application will save you time and risk in the long run. Call us if you'd like to talk about it in more detail.
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