Expenses
for Employees
Normally, the payment or reimbursement of expenses
or the provision of a benefit in kind is taxable
on the employee. However, particularly with expenses,
it may well be that the employee is entitled to
tax relief personally on the same amount. In order
to obtain the relief, the employee would have to
write to HMRC or fill out a tax return.
To save all this paperwork, employers may request
a dispensation from HMRC. If HMRC grant one, it
means that they are happy that the reimbursement
contains no profit element. In turn, this means
that the expenses or benefits are not taxable but
that the employee can not claim tax relief personally.
HMRC have issued a warning to employers regarding
a change in their policy on dispensations. Normally,
once a dispensation has been granted it would continue
to apply until the qualifying conditions were no
longer satisfied. If a dispensation had been operated
incorrectly, it would only be revoked retrospectively in
exceptional circumstances.
HMRC will now consider revoking a dispensation
retrospectively where:
‘… there is any evidence of misrepresentation
or negligence by an employer, or other person paying
expenses or providing benefits in kind. Examples
of this can include:
- if an application for a dispensation did not
provide all the relevant information; or
- if there was a change in the way the expenses
and benefits were made available to employees
meaning the qualifying conditions were no longer
met, and we have not been informed of the change. ‘
There are two important points to note. Firstly,
HMRC state that this change will not affect the
great majority of employers who apply for and operate
dispensations correctly.
Secondly, if you don’t currently have a
dispensation, please get in touch so that we can
see if one would save you time (and money!)
Internet Links:
HMRC
Employer Bulletin |
