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HMRC internal manual

Employment Income Manual

Dispensations: dispensation letters

Dispensation notice

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  For tax years 2016-17 onwards dispensations have been replaced by an exemption for amounts which would otherwise be deductible.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

The dispensation notice should be worded as follows:


This dispensation applies to the expenses payments, cash and non-cash vouchers*, use ofcredit tokens*, benefits and facilities which are set out below. For the purposes of thisdispensation these matters are referred to collectively as “expenses payments andbenefits”. It means you will not have to report these expenses payments and benefitsat the end of the year on forms P11D or P9D. It revokes from the date of this dispensationany previous dispensation covering expenses payments or benefits of a similar nature.

I am giving you this dispensation because I am satisfied, on the basis of what you havetold me, that no additional tax would be payable by the employees concerned** on theseexpenses payments and benefits. I am authorised to do this by Section 65 and Section 96 ofthe Income Tax (Earnings and Pensions Act) 2003.

The dispensation applies only to the expenses payments and benefits, set out below, in thecircumstances there set out. If the expenses payments or benefits are paid or provided incircumstances which give rise to additional tax, this dispensation will need to berevoked. Where necessary, the revocation may apply to expenses payments and benefitsalready provided. In that case additional tax will be due. So it is important that you letme know if you alter your system for controlling expenses payments and benefits, orincrease their amounts, or change their nature or make any other changes which may affecttheir taxability.

Payments and benefits that are in any way different, or are provided in circumstances thatdiffer, from those set out below will not be covered by this dispensation and should bereported in the normal way.


Nature of payments and benefits provided

(Employees concerned**:-)


  • Include the reference to vouchers, credit tokens and Section 96 ITEPA 2003 only wherethe expenses are met by means of vouchers, credit cards or other credit tokens.

**Omit the references to the employees concerned where the dispensation refers to all theemployees for whom the application was made. If the application is for a particular groupof employees, for example salesmen and women, put “by your salesmen and women”instead of the references in the text of the letter to employees, and omit the schedule ofthe employees concerned at the end of the letter.

List the payments for which the dispensation is being given as precisely as possible.

Letter accompanying the dispensation notice

“Thank you ….

I enclose a dispensation notice in respect of …… expenses. I would stress that thisdispensation applies only to such expenses incurred in the circumstances detailed in yourletter(s) of ….. and all other expenses and benefits (for example, cars, loans etc)should continue to be reported on forms P11D.

If you propose to increase the amounts of your scale rate payments for ….. or to extendor change the circumstances in which the payments are made, please contact me so that Ican consider whether the dispensation can be continued.”

In some cases you may wish to remind employers to send forms P46(Car) for new car users.If so, add at the end of the second paragraph:

“May I remind you that it will help me to keep your employees’ tax affairs up todate if you send me a form P46(Car) when an employee first becomes liable to tax inrespect of a car you provide.”

Letter refusing dispensation

“Thank you …..

I regret I am unable to give a dispensation in respect of ….. expenses as requested byyou because ………………..

(include the appropriate reason, for example, I am not satisfied that the amount you paydoes no more than reimburse expenditure incurred by your employees, or I am not satisfiedthat the circumstances in which you pay these allowances are limited to those when theemployee would be able to claim a deduction for the expenses.

Expand if this will be helpful, for example, your mileage rate at 45p per mile is greaterthan the authorised mileage allowance payment figure that employees must use for taxpurposes, or the travelling expenses you pay reimburse employees for their home to worktravel, and this expenditure is not allowable to your employees for tax purposes.)”