The Dispensation
...not quite the meal ticket you are led to believe
If a PAYE umbrella company says you can claim expenses under the terms of their dispensation, understand that although you may not be required to send them the hard copy receipts you should certainly still retain those receipts for future HMRC auditing purposes as failure to substantiate your expenses claims will no doubt result in additional taxes being payable by you along with any associated fines and penalties with the worst case scenario being imprisonment for blatant abusers.
HMRC requirement is that receipts are retained for a period of up to 7 years for auditing purposes
The simple rule is this, if you didn't incur the expense in the first place, don't claim for it!
Be very wary of Umbrella Companies that try and sell you their dispensation...
A dispensation is an agreement a company has with HMRC in respect of relieving the company of it's administration burden at the end of the tax year when completing forms P11D. The dispensation allows the company to process certain expenses without having to record them or file the associated receipts, therefore reducing the amount of administration the company has to do.
A Common misconception fuelled by the unscrupulous Umbrella to gain your business
Some PAYE Umbrella Companies will quite openly advertise, sell and abuse their agreement with HMRC and in doing this will often encourage you to claim certain set amounts specified within their dispensation irrespective of whether you actually incur the expense or not.
There is no such thing as FREE Expenses
Ask yourself this...
If you did not incur the expense in the first place, why would HMRC allow you to claim for it?
So just what are the benefits if any to the employee then?
- You won't have to include details of the expenses and benefits in any tax returns
- The expenses and benefits are not included in your PAYE codes
- Reduced admin - if you retain the receipts at your own premises for auditing purposes
