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HMRC internal manual

Compliance Operational Guidance

HM Revenue & Customs
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Supporting Guidance: employer compliance: guidance by subject: specialist employer compliance: dispensations - what can and cannot be included - pre 6 April 2016

This page only applies prior to 6 April 2016

Detailed guidance on what can and cannot be included in a dispensation is contained in the Employment Income Manual. The attached tables provide a summary of those items.

Items which can be included in a dispensation (Word 40kb).

Items which cannot be included in a Dispensation (Word 32kb).

Scale rate Payments

In general, scale rates are only appropriate for inclusion in a dispensation where employers reimburse expenses which are:

  • widely incurred,
  • in broadly similar amounts, and
  • for which it is often difficult for employees to get receipts.

The guidance at EIM05100 and EIM05200 should be followed.

Where a request is made for a dispensation to include a scale rate payment, evidence should be sought to make sure that the sum does no more than meet the expense incurred.

Evidence of expense incurred by a random sample of 10% of eligible employees, for a period of one month, will normally be acceptable

Benchmark scale rates for day subsistence

HMRC has introduced an advisory system of benchmark scale rates which employers can use to make subsistence payments to employees who incur allowable business travel expenses free of tax and National Insurance contributions (NICs). This advisory system was implemented from 6 April 2009.

The advisory system only covers benchmark scale rates for day subsistence payments. If an employer wishes to pay subsistence to employees who have to stay overnight they can either reimburse the actual cost incurred by the employee or agree a tailored scale rate to cover meals and other expenses in a dispensation with HMRC, see EIM5230 - EIM5231 and EIM5250.

Statutory Exemptions

Often employers apply for a dispensation for items that have a statutory exemption. Where such an application is received the employer should be advised that a dispensation is not appropriate and their attention drawn in writing to the statutory provision.

Current statutory exemptions for which dispensations are frequently requested are shown in the attached table (Word 43kb). (This list is not exhaustive and may be subject to change)

Airline Sector Flight Duty Allowance

Airline FDA cannot be included within dispensations.

The PAYE, SA & NICS (PSN) site under Specialist Notes, Documents and links provides information on how Airline Sector FDA’s should be dealt with. PSN should be contacted where further guidance is required. Also see COG908650 - Airline Industry - Flight Duty Allowances and Sector Pay.