Introduction
In the “employee management services” market there is one topic that gets plenty of coverage, Expenses!
This article explains the HMRC rules for claiming expenses, what an HMRC Dispensation agreement means, and why you cannot claim expenses without receipts.
Market offers
There are different types of employee management Service Company:
- Umbrella
- Limited company management.
Each offers a variety of claimable expenses.
There is no “level playing field” in relation to the type of expenses that may be claimed. As such they are often misused as a selling feature between
companies.
Genuine expenses – HMRC rules
Genuine business expenses are completely legitimate but are strictly controlled by HMRC. They publish a whole series of guides that relate to the
rules for claiming expenses.
These guides are very relevant and have much of the information that is often quoted (or misquoted):
For each professional contractor, irrespective of their payment structure,
these two documents will prove very useful in remaining within the guidelines.
HMRC Dispensation
Expense dispensations are often marketed by as a way to take home as much as money as possible. This is a complete contradiction in the way that HMRC grant dispensations.
Rob Crossland - Parasol IT
As an “employer” (owner managed limited company) or even as an umbrella
employee it is very important to understand another misused concept, the
expense “dispensation”.
Expense dispensations are often marketed by as a way to take home as much as
money as possible. This is a complete contradiction in the way that HMRC grant dispensations.
The revenue describe a dispensation as,
“A dispensation is a notice, issued by an Inspector, which relieves you from reporting details of expenses and benefits on forms P11D or P9D.”
Note how this does not state “you can claim for lots of
different types of expenses without receipts!” This is often touted however as
the way in which a dispensation works. e.g. “claim £25 a day without receipts
for subsistence”.
The reality is that a receipt should be retained by the employee but that it
need not be forwarded to the employer on the monthly claim. The Revenue set the
dispensations up to reduce paperwork for employers at both year end and also
for employees during the course of a working year.
The misnomer that receipts are not required AT ALL is simply
incorrect, receipts are not required by the employer for certain specific
expense claims but the Revenue could and do check with individuals that the
expenses are legitimate.
Any company offering a dispensation as a “feature” should have an auditable
expense process and an employee should not be surprised to be asked to prove
receipts.
In summary, dispensations are perfectly legal and are intended to help employer
and employee alike. They provide an easier way to record business expenses but
do not remove the need to be able to prove real expenses through retention of
receipts. The
Revenue page on dispensation has more specific information.
So be aware of men in shiny suits offering free lunches and no receipts, ask
for a receipt and keep it safe!
Published: Wednesday, June 14, 2006
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