Expenses and Benefits for Employees
Until 2015-16, it was possible to apply for a dispensation to exclude certain expenses and benefits provided to employees from the year end returns to HMRC: primarily the submission of forms P11D. These dispensations ceased to be effective from 6 April 2016.
From this date many of the expenses covered by dispensations were exempted from the benefits legislation. The sorts of expenses covered include:
- business travel
- business phone bills
- business entertainment expenses
- uniform and tools for work
To qualify for an exemption, employers must either be:
- paying a flat rate to your employee as part of their earnings, this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC,
- paying back the employee’s actual costs
Employers do not have to formally apply for exemption if they reimburse using HMRC’s benchmark rates for allowable expenses. You only need apply if you want to use your own rates as these rates will need to be agreed with HMRC. There must be systems in place to check the payments are as agreed with HMRC.