From April 2016 all employee expense Dispensations agreed with HMRC will cease to apply!
You will need new systems for checking expenses, HMRC will be supply examples.
Expenses which are not covered by benchmark scale rates are likely to paid and taxed via the payroll with the employee claiming relief through P87 and Self Assessment SA100.
Are you ready for the new regime?
It’s P11D time, but have you considered giving your employees benefits in kind that are tax free, here are some to choose from:
Pensions – Up to £40k can be paid in to you pension schemem by your employer (2014/15) and you can use carry forward to pay in even more
Childcare – Up to £55 per week but check the rules to makesure your childcare complies (
HMRC Leaflet IR115) Mobile Phone – One per employee
Tax Free Lunch Blog Cycle Schemes –
Cycle to Work Blog Fitness –
Fitness Blog Parties and Gifts –
Christmas Blog Parking –
Parking Blog Business Mileage Allowance – 45p for the first 10,000 miles then 25p
Long Service Award – A bit restrictive as you need 20 years service, the tax free amount is £50 x the number of years
Eye Tests and Spectacles – The Eye Test must be needed under the Health & Safety at Work Act
Suggestion Schemes –
Suggestion Scheme Blog Insurance such and Death in Service and Income Protection –
Medical Insurance Blog Travel Expenses –
Travel Blog Working From Home –
Working from Home Blog
PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.
Applications for PSA’s should be made before 6th July 2013 if you want to use them for the tax year ended 5th April 2013, once approved by HMRC payment of the Tax and NI is due by the 19th October (payments by cheque) or 22nd October (payments online).
The tax due is grossed-up at the employee’s marginal rate. For example, £5,000 of benefits provided to higher rate taxpayers (40 per cent) would be grossed-up as follows:
Benefits of £5,000 x 40 per cent = £2,000 tax
Grossed-up tax = £2,000 x 100/100-40 = £3,333.33
Benefits plus grossed-up tax = £8,333.33 x 13.8 per cent Class 1B = £1,149.99
Total due to be paid £3,333.33 tax plus £1,149.99 Class 1B = £4,483.32
PAYE Settlement Agreements can only be created for:
) examples (not exhaustive) of what may constitute a minor item.
reimbursement of late night taxi fares outside s248 ITEPA 2003
personal incidental expenses in excess of the statutory daily limit
present for an employee in hospital
staff entertainment, for example a ticket for Wimbledon
use of a pool car where the conditions for tax exemption are not satisfied
subscriptions to gyms, sports clubs etc
gift vouchers and small gifts
PSA 1070) examples (not exhaustive) of what may constitute an irregular item.
relocation expenses where the amounts concerned exceed the £8000 tax exempt threshold (Section 287 ITEPA 2003)
occasional attendance at an overseas conference where not all the expenses qualify for relief
expenses of a spouse occasionally accompanying an employee abroad
occasional use of a company holiday flat
one off gifts which are not minor.
PSA 1080) examples (not exhaustive) of what may constitute an impracticable item
free chiropody care
Christmas parties and similar entertainment provided by the employer which do not already qualify for relief
cost of shared taxis home which do not satisfy s248 ITEPA 2003
Gov.uk has guidance on
How to get a PSA
Dispensations are granted by HMRC for expenses and benefits and remove the need for P11D’s and P9D’s.
The main expenses routinely 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
Provided you have someone checking expense claims and the claims arent excessive, you wont need receipts.
Its worth getting your dispensations now rather than applying in the new year as if you dont get them before April you will end up filling in P11D’s and P9D’s.