| 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 |
