Dispensations are an excellent way of saving yourself a lot of work at the end of the tax year when the Revenue expects you to file P11Ds for expenses and benefits. With a dispensation, you are allowed to ignore certain expenses and not report them on a P11D.
Your tax office will grant you a dispensation against having to report certain types of expenses if they are happy that you have sufficient control of your accounting system for recording those expenses and there would be no taxable benefit. Travel and subsistence is the most common example as this is usually incurred wholly, exclusively and
necessarily for the purpose of doing your job. Other examples include
telephone bills, office supplies, subscriptions and entertainment.
To apply for a dispensation, you need to fill out Form P11DX and send
it to your PAYE office. The Revenue is more relaxed about granting
dispensations to smaller employers than they used to be as they
recognise that they save everyone a lot of work. However, they do
follow them up every few years to make sure that the terms and
conditions are being complied with and they have the power to revoke
them retrospectively if they suspect that they are being abused.
For small companies controlled by one director they are still a bit
reticent about business entertainment. They seem to think that sole
directors are less constrained in this area as there are no other
authorised officials to vouch their receipts. It is therefore common for
smaller companies to be granted dispensations that exclude
entertaining, meaning that these expenses must continue to be
reported on a P11D.
Come and speak to us if you have any problems claiming a
dispensation. We have had years of experience negotiating with the
Revenue on the kind of items that should be allowed in dispensations.