A dispensation is a notice from HM Revenue & Customs (HMRC) that removes the requirement to report certain expenses to them at the end of the year on forms P11D or P9D. There is also no need to pay any tax or National Insurance contributions to HMRC on items covered by a dispensation.
Once granted, dispensations last indefinitely. However, HMRC reviews them regularly – usually at intervals of five years or less – to make sure that the conditions under which they were issued still apply.
Expenses generally covered by a dispensation are:
- travel, including subsistence costs associated with business travel
- fuel for company cars
- hire car costs
- business entertainment expenses
- credit cards used for business
- fees and subscriptions
HMRC strictly apply the dispensation from the date they accept an application, although in most cases they will agree to retrospective cover to the beginning of the current tax year.
The application process is fairly straight forward, complete and submit form P11DX. Do take care in completing the form. If you are at all unsure of the answers to the various questions, or would like us to apply for you, please contact us.