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 link:
HMRC
Employer Bulletin |
