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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: specialist employer compliance: dispensations - introduction

A dispensation (Word 32kb) must be given where an employer satisfies HMRC that there is no tax due on expenses or benefits paid or provided to employees or directors.

The advantages of a dispensation are:

  • to an employer - is that the items covered by the dispensation do not have to be returned on form P11D.
  • to an employee - is that they do not need to include on their income tax returns and is not included in assessments or their PAYE coding.
  • to HMRC - fewer forms P11D need to be processed.

Before a dispensation can be issued the person paying the expenses or providing the benefit has to apply

  • using a P11DX which is available on the HMRC website, or
  • by writing to explain the circumstances in which payments of a particular sort are made, or what benefits are being provided

Where form 64-8 is held the application may be accepted in writing from the appointed agent.

The SEC will:

  • deal with all unprompted dispensation applications (Word 40kb) from employers
  • deal with referrals from compliance officers (ECR308) following a compliance check
  • review all existing dispensations in accordance with COG907150 
  • provide advice to HMRC staff and employers on dispensations.

When dealing with a dispensation application or review of the dispensation the Specialist Employer Compliance must check ECS and other systems to:

  • identify whether there is an appointed CRM
  • identify whether there is a PT International interest COG907180 
  • identify an open EC compliance check by another team and
  • must liaise with the CRM /CPPT /caseworker before continuing.

In addition the SEC must consider the impacts any changes may have on the customer who may need to amend:

  • expenses procedures
  • employee guidance and training
  • accounting procedures
  • reporting procedures

and consider with the customer an appropriate date on/by which any change will come into effect.

There is no requirement for a PAYE scheme to be opened where a company is set up which will never pay earnings, and which, in advance of providing benefits or paying expenses, agrees a dispensation with HMRC.

Where an application for a dispensation is made in these circumstances a request should be made for a ‘pseudo’ employer’s record in accordance with PAYE20070 

Guidance on dispensations is contained in this chapter and in the Employment Income Manual at EIM30051 onwards.