Tag Archives: P11D


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. There is also no need to pay any tax or National Insurance contributions on items covered by a dispensation.

It also removes the requirement for employees to submit claims for deductions against expenses previously reported on forms P11D or P9D.

Once granted, dispensations last indefinitely. However, HMRC reviews them regularly (usually at intervals of five years or less) to make sure that the conditions under which they were issued still apply.

What items can and can’t be covered by a dispensation?

You can apply to HMRC for a dispensation to cover expenses or benefits for which your employee gets a full tax deduction.

The main expenses routinely covered by a dispensation are:

  • travel, including subsistence costs associated with business travel
  • fuel for company cars
  • hire car costs
  • telephones
  • business entertainment expenses
  • credit cards used for business
  • fees and subscriptions

Systems you must have in place

You must have an independent system in place for checking and authorising expenses claims. At a minimum, this means having someone other than the employee claiming the expenses check that the:

  • amount claimed isn’t excessive
  • claim doesn’t include disallowable items

If it is not possible for you to operate an independent system for checking and authorising expenses claims – for example, because you are the sole director of your company and you have no other employees – you will only be able to obtain a dispensation if you:

  • ensure all expenses claims are supported by receipts for the expenditure
  • demonstrate that the claim relates to expenditure that can be covered by a dispensation – your receipts may be sufficient for this purpose, but if not you must retain additional information

Mileage Payments – Allowable Expenses

Most people are aware that you can claim a mileage allowance when using your own car for business purposes.

For Business Owners

The approved mileage allowance for cars is 45p per mile for the first 10,000 miles and 25p per mile thereafter. But did you know that you can also claim an additional 5p per mile for each passenger travelling with you for business?

If you use the approved mileage allowance then there is no need to complete these details on the P11D at the end of the year.

For Employees

Also, the approved mileage allowance doesn’t just apply to those claiming for their own business but also applies to employees.

An example, if your employer only pays you 30p per mile for business, the approved amount is higher so you’re entitled to Mileage Allowance Relief on the difference.

For example: if you use your own car for 900 business miles and your employer pays you 30p per mile. The approved amount is £405 (900 x 45p). The allowance you get from your employer is £270 (900 x 30p). Your Mileage Allowance Relief is £135 (£405 less £270).

The Mileage Allowance Relief will reduce the amount of income you pay tax on, so your tax bill will reduce by £135 at 20% (if you’re a basic rate taxpayer) or at 40% (if you’re a higher rate taxpayer) and at 45% (if you’re an additional rate taxpayer)

You are only entitled to Mileage Allowance Relief if your employer pays you:

  • no mileage allowance
  • less than the approved amount. If your employer pays you more than the approved amount, you’ll have to pay tax on the extra.

The mileage allowance also applies to motorcycles and bicycles

For a motorcycle you can claim 24p per mile and there is no upper limit as with cars.
For a bicycle you can claim 20p per mile.

What records you must keep?

You need to keep records of dates, mileage and details of all work journeys. Your employer needs this information to make expenses payments to you. You also need them to get any Mileage Allowance Relief.

If you use different vehicles

If you use more than one vehicle of the same kind add all your business miles together in one calculation.

If you use vehicles of different kinds make separate calculations for each one.

If you would like some advice on what business and personal expenses are allowable, please get in touch.

Company Car Tax 2014-15 – Allowable Expenses and Benefits

Changes from 2014-15

The lower threshold will be reduced from 115g/km to 110g/km.

11 per cent will now apply to cars with CO2 emissions of 76g/km to 94g/km for petrol cars and 13 per cent for diesel cars.

The appropriate percentage will increase by 1 per cent for all vehicles with CO2 emissions between 95g/km and 210g/km, to a maximum of 35 per cent.

Here are some examples of the lower % benefit in kind (BIK) tax:

Model List Price CO2 emissions g/km BIK % Tax at 20% Tax at 40%
Audi A3 Hatchback 1.2 TFSI 105 S Line 3dr £21,655 114 15% £650 £1,300
BMW 1 Series Hatchback 116d ED 3dr £20,830   99 15% £625 £1,250
Fiat 500 Hatchback 0.9 Twin Air 105 GQ 3dr £15,260   92 11% £336 £   672
Ford Fiesta Hatchback 1.6TDCI 95 Titanuim ECOnetic 3dr £16,345   87 13% £425 £   850
Hyundai i10 Hatchback 1.0SE Blue Drive 5dr £  9,795   98 12% £235 £   470
Mini Cooper Hatchback 1.5D 3dr £16,450   92 13% £428 £   856
Toyota Auris Hatchback 1.8 VVT-I Icon Hybrid 5dr £20,595   84 11% £453 £   906
Volvo V40 Hatchback 1.6D2 115ES 5dr £20,345   88 13% £529 £1,058

Of course, the lowest appropriate percentages are still 0 per cent and 5 percent.

The 0% BIK cars are electric, for example BMW i3 Electric Car 127kW Auto Electric drive-train, 5 door, the list price for this is £30,625 but you’ll pay £25,625 with the £5,000 government subsidy.

In addition, these cars also benefit from lower road tax:

Petrol car (TC48) and diesel car (TC49)

Band CO2 emission (g/km) 12 months rate 6 months rate
A Up to 100 £   0.00 Not available
B 101-110 £ 20.00 Not available
C 111-120 £ 30.00 Not available
D 121-130 £110.00 £60.50
E 131-140 £130.00 £71.50

If you want advice on your company car tax position and what may be best for you and your business, please get in touch.