Accounting Matters
with PKF FPM

Changes to Employee Expenses

Question
I reimburse my employees travel and subsistence expenses towards the cost of business trips and have recently been advised that I should have a Dispensation from HM Revenue and Customs. What is the benefit of a Dispensation?

Answer

A dispensation is an agreement that allows employers to pay specified expenses to their employees without deducting Tax or NIC or reporting the payments to HMRC. Without a Dispensation agreement from HMRC the payment or reimbursement of travel and subsistence expenses, even though they are qualifying business expenses, should be returned on annual P11D Returns of Benefits and Expenses. Employees can in turn make a separate claim to HMRC for tax relief on such expenses.

In order to avoid the reporting of such qualifying expenses and avoid the hassle for employees having to claim relief, it is always advisable to have a Dispensation in force.

However, HMRC are currently in the process of introducing proposals which will mean employers will no longer need to apply for a dispensation to receive this treatment. Instead employers will be permitted to make expenses payments to employees without deducting Tax or NIC or report them to HMRC as long as they can satisfy themselves that the expenses being reimbursed qualify for tax relief in full. This will be done by employers own internal checking procedures. This will be of great benefit to both employers and employees and will cut out the administrative burden of reporting requirements on such qualifying expense payments. No date has yet be set for the implementation of the above, but if approved could be introduced as earlier as 6th April 2015.

The advice in this column is specific to the facts surrounding the questions posed. Neither PKF-FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

Email: f.mccormack@pkffpm.com

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