EIM30059 - Dispensations: checking and authorisation of expenses payments

The extent of checking that is needed will depend upon the scale of the business. All that is needed is that someone other than the employee incurring the expense is responsible for ensuring that the claim made by the employee does not include disallowable items, and is not excessive.

In larger organisations this may take the form of a detailed check of, say, every tenth claim only, but this should be regarded as sufficient. In smaller organisations, the directors may know all about the particular expenses incurred by employees, and there may be no need for checking at all.

For personal reasons, or reasons of confidentiality, the proprietors of a business, for example, the director/shareholders, may have a free hand in deciding what they take as expenses. If so, it will not usually be appropriate to give a dispensation for them, but other employees can still be included.

This does not mean that expenses payments to directors/shareholders can never be included in a dispensation. For example, if the application is for a dispensation in respect of reimbursements to a controlling director/shareholder of expenditure that:

• is independently vouched and
• is allowable as a deduction from earnings (e.g. if necessarily incurred on travelling in the performance of the duties) and
• the Officer is satisfied that no additional tax is at risk,

there is no reason why a dispensation should not be approved.

In some instances, lack of an independent voucher is not necessarily a bar to inclusion in a dispensation - for example, a subscription to an approved body under Section 344 ITEPA 2003 (see EIM32880). You should consider more carefully the reimbursement of subsistence costs, for example, where an independent voucher cannot be supplied.

In cases of this kind it is particularly important that it should be clear from the dispensation letter (see EIM30085) that the dispensation applies to a limited class of payments only and does not cover whatever the director decides to take as expenses.

Tax may be at risk where a dispensation letter is so worded as to include items that should be excluded.