P11D dispensations have been dispensed with

George Hay Chartered Accountants

Last year saw an important change to the way tax-deductible business expenses, paid to employees, are dealt with.

Up until 5th April 2016, employers who did not have a dispensation from HM Revenue & Customs (HMRC) were required to report expenses that were paid to employees.

From the 6th April 2016, these dispensations have been abolished and such expenses are no longer reportable to the revenue.

Effectively this means that businesses that did not have a dispensation in place will no longer have to deal with the administrative burden associated with completing a P11D to report expenses. However, the flip-side to this is that employers are now required, by law, to have a system in place for validating expense claims.

Additionally, the new exemption does not apply in circumstances where a reimbursement is provided in conjunction with a salary sacrifice scheme.

The same raft of changes have also impacted on the procedures for trivial benefits in kind. The changes mean that any benefit that meets the following criteria, set out by HM Revenue & Customs, is exempt from Income Tax and National Insurance:

  • The cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person);
  • The benefit is not cash or a cash voucher;
  • The employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements); and
  • The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services).

The rules differ for office holders of the company, family members and members of the household, whose exemption is capped at £300 in total for the tax year.

GH Payscheme provides a dedicated outsourced Payroll and pay advice service to all industry sectors, tailored to your own personal requirements. Our team can help you with all your Payroll queries, from PAYE to electronic filing and from Year End Returns to regulatory forms. Contact our team today to find out more about how we can help you.

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