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HMRC internal manual

Employment Income Manual

Dispensations: conditions to be satisfied

Section 65(1) to (4) ITEPA 2003

The guidance on this page applies for the tax years up to and including 2015-16.  For tax years 2016-17 onwards dispensations have been replaced by an exemption for amounts which would otherwise be deductible. See EIM30200 onwards.

In order that a dispensation can be issued:

  • a person has to supply the Officer with a statement of the cases and circumstances in which payments of a particular character are made or benefits or facilities of a particular kind are provided and
  • HMRC has to be satisfied that no tax will be payable by reference to the payments, benefits or facilities mentioned in the statement.

In practice the Officer should issue a dispensation where all the following conditions are satisfied:

  • employees are reimbursed expenses that are deductible within Part 5 ITEPA 2003 (see EIM30057)
  • claims to expenses are independently checked and authorised (see EIM30059)
  • where possible claims are vouched (see EIM30059)
  • The employer has procedures in place to ensure that only qualifying employees receive reimbursement in the form of a scale rate payment (see EIM05200 onwards).
  • where advances of expenses are made, the employer has procedures to ensure they are fully accounted for, and any excess repaid by the employee.

For the way a dispensation should be worded see EIM30085.