Umbrella Dispensation

Big Words That Mean Little… “Special Dispensation”

Despite what you may be told, it is HMRC who decide what can and can’t be claimed as an expense and not an umbrella company. Some companies claim that they have a ‘special umbrella dispensation’ which makes their expenses policy different from their competitors – it doesn’t.

To quote directly from HMRC:

“A dispensation is a notice from HMRC that removes the requirement for the employer to report certain expenses and benefits at the end of the tax year on forms P11D or P9D”. So basically it’s a time saver for the bean counters at the umbrella company.

Claiming expenses with a dispensation

If the umbrella company does have a dispensation it means that HMRC has reviewed the expense claims that contractors have submitted and accepted that they are allowable and have been correctly dealt with. The dispensation will be reviewed on a regularly basis and, if the umbrella company has not maintained these standards, it will be revoked.

Expenses covered by an exemption

You don’t have to report certain business expenses and benefits like:

Business travel
Phone bills
Business entertainment expenses
Uniform
Tools for work

To qualify for an exemption, you must be 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.

HMRC explanation of dispensations, now known as exemptions, that they grant!

LEGISLATION UPDATE: Please note Legislation changes may restrict contractors claiming Travel & Subsistence expenses unless they can prove that they are not under the Supervision, Direction and Control (or the right thereof) of the end client.
Find out more here