In the past, many businesses have applied to HMRC for dispensations, which have allowed expenses and benefits to be provided to an employee without being included on a P11D or subject to PAYE and NIC. A dispensation was only given where HMRC were satisfied that the employee would have been entitled to full tax relief on that payment or benefit.
From 6 April 2016, businesses will no longer be able to apply for a dispensation and all existing dispensations will come to an end. Instead a new exemption will be introduced which effectively means that businesses will not have to pay tax and NIC on paid or reimbursed expenses payments or put them on a P11D. The exemption is subject to the condition that the business satisfies itself that the employee would be entitled to full tax relief on that payment or benefit.
The main types of expenses to which the exemption applies are:
- travel and subsistence expenses
- fees and subscriptions
- business entertainment expenses.
This list is not exhaustive and all non-allowable expenses will still be reportable on a P11D and/or subject to PAYE (and possibly NIC). Employees will still be able to claim tax relief in respect of unreimbused business expenses.
If you would like to discuss these changes and how they affect you then please call us.
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