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HMRC internal manual

Employment Income Manual

Dispensations: relationship with £8,500 threshold

Section 217 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  For tax years 2016-17 onwards dispensations have been replaced by an exemption for amounts which would otherwise be deductible.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 EIM30200onwards.

Expenses payments and benefits covered by a dispensation do not count as earnings indeciding if an employee is earning £8,500 or more. Therefore a dispensation should not begiven if it would result in the employee’s earnings being less than £8,500, when they are£8,500 or more with expenses included.

However, this point is only important in practice in those cases where a benefit in kind(for example, a company car) would not be chargeable as a result of giving a dispensation.A dispensation should not therefore be automatically refused for a particular employeesolely because its effect would be to make his total earnings for tax purposes less than£8,500. Officers should exercise their discretion. In most companies all the employeeswith company cars etc will be within the benefits code (see EIM20007)and enquiries should be limited to cases where there may be tax at risk.