Appendix 1: P11D Dispensation

Employees covered by this dispensation:

A. Directors, where the directors' expenses claims are independently checked and authorised by another person, or where full receipts or relevant vouches are held in support of the expenditure.

B. All other employees whose claims are independently checked and authorised by another person, except:

Where the exemptions provided by this Dispensation Notice in any year would bring their total earnings (including all expenses and benefits) below £8,500; and
There are other payments of expenses and benefits which would thereby cease to be taxable under the benefits code in section 63 ITEPA 2003.

Employees not covered by this dispensation:

Non-UK domiciled individuals working in the UK who have an employment relationship with an employer resident outside the UK.

Nature of Payments and Benefits Provided

1. Subsistence

The reasonable and necessary cost of a meal/snack and beverages incurred by an employee whilst undertaking travel, the expenses of which are included in the section relating to Travel (Excluding Mileage Allowances). The travel must occupy the whole or a substantial part of a working day encompassing the normal meal breaks. Claims must be supported by relevant receipts.

The reasonable cost, when supported by relevant receipts or invoices, of accommodation, breakfast, lunch, if applicable, and an evening meal (except where accompanied by a spouse or relative, etc.) incurred by an employee who is required to stay overnight in the course of such a journey. The travel can be either within or outside the UK but the employee must be working away on company business.

Excluded from the dispensation are the cost of videos, newspapers, beverages not complementing an evening meal and private telephone calls, all of which are covered by the legislation relating to Incidental Overnight Expenses. (Please read Appendix 8 of the HM Revenue and Customs booklet 480 for further information.)

The maximum amounts of incidental overnight expenses that an employer may reimburse free of tax are:

£5 per night for overnight stays anywhere within the United Kingdom (Great Britain and Northern Ireland); and
£10 per night for stays outside the United Kingdom.

If the total amount paid exceeds the maximum tax free amount for the period of absence, the whole of the payment becomes taxable, not just the excess.

2. Travel (Excluding Mileage Allowances)

Reimbursement of the costs actually incurred by employees, when supported by receipts, on journeys undertaken for business purposes by road (excluding mileage allowances), rail, air and sea, but excluding ordinary commuting. The cost of fuel and landing fees for business journeys by light aircraft.

Minor business travel expenditure such as parking, road and bridge tolls and tube fares for which receipts are not available may be reimbursed under the terms of this dispensation notice providing that there is alternative supporting documentation to confirm that the expenses were necessarily incurred.

For further guidance on qualifying business travel, please see booklet 490 (Employee Travel - A tax and NICs guide for employers).

Exclusion of Ordinary Commuting

Travel between an employee's home, or any other place that is not a workplace, and his/her normal place of work is ordinary commuting and is not covered by the dispensation.

Note: Dispensations are no longer available in respect of mileage allowances paid to employees using their own vehicles for business travel. Amounts not exceeding the qualifying amount, the number of miles of business travel multiplied by the currently applicable rates, are exempt from tax. Amounts in excess of the approved amount are always taxable. The current rates can be found at: www.hmrc.gov.uk/rates/travel.htm. Earlier rates can be found from a link on that page.

3. Home telephone (main line) / personal mobile telephone

Reimbursement of the cost of business calls made from a private home telephone or employee's personal mobile telephone, where justified by reference to the itemized bills. The line rental remains the personal liability of the subscriber.

4. Home telephone (second line)

The cost of line rental and business calls on a second landline telephone line provided in the employee's home for which the employer is the subscriber, where:

There is a clear business need for the employer to provide the employee with a second telephone line for the making and receiving of business telephone calls, faxes and / or e-mails at the employee's home which are a vital and central part of the employee's duties; and
The employer has procedures to monitor, control and minimize the cost to him of private use; and
The employer has no intention of rewarding the employee.

If the cost of private calls is significant, the cost of private calls will remain a taxable benefit to the employee, but any amount that the employee makes good for the private calls will reduce the cash equivalent of the benefit.

5. Broadband internet access

The receipted cost of Broadband Internet access provided in the employee's home where ALL of the following conditions are met:

The employer is the subscriber;
The employee is required to perform some or all of their duties at their home address;
There is a clear business need for the employer to provide the employee with internet access;
Such access forms a vital and central part of the employee's duties;
The employer has no intention of rewarding the employee;
Private use is not significant;
Any private use does not affect the cost of the package.

6. Entertaining

The cost of entertaining customers or potential customers, suppliers or other business connections at genuine business occasions. This section only applies to expenditure that falls to be disallowed in the employer's accounts in accordance with Section 45 ITTOAI 2005 or Section 557 ICTA 1988.

The following can usually be regarded as reasonable and genuine business occasions:

Product launches;
Lunches and similar events for customers or potential customers at which business is discussed;
Exhibitions and similar events at which products are on display for customers.

Claims for entertaining expenses should be supported with records of the amounts spent on particular occasions, the nature of the entertainment, the persons entertained and the reasons for the entertainment.

7. Company credit cards

This dispensation covers goods or services obtained by means of a company credit / debit card supplied by reason of employment. The employee must reimburse the employer in full for any personal expenses incurred. The cost of any business related goods or services obtained by use of the credit card must be in such circumstances that, had the employee incurred it, there would be a deduction for it under Sections 336-338 of the Income Tax (Earnings and Pensions) Act 2003.

8. Professional fees and subscriptions

Professional Fees and Subscriptions paid by or on behalf of an employee to an organization, included in HM Revenue and Customs List 3, where the activities of the organization are relevant to the office or employment in accordance with Section 343 and 344 Income Tax (Earnings and Pensions) Act 2003.

The activities of the organization are relevant to the office or employment if the performance of the duties is directly affected by the knowledge that the organization exists to provide, or they involve the exercise of the profession the organization represents.

9. Payments to overseas workers

Where receipts are provided and strictly under the conditions outlined in your letter of 07 September 2009 and that of the Payroll Manager on 10 July 2009 I can agree that the payments to overseas workers can be treated as business expenses.

Payments are made under a variety of circumstances, although fundamentally the underlying principles are very much the same:

(a) A member of staff of the University will be engaged in research or other fieldwork (e.g. social sciences type research engaging with people in foreign countries; archaeological digs outside of the UK; scientific work related to animals, plants or the environment in various other parts of the world; medical field studies overseas, etc.)

(b) Often there is a need to engage an individual locally in the area where the study is being conducted. This may be to act as a guide; a respondent to research questions, studies or scenarios; a local worker (e.g. in an archaeological dig, or in helping move equipment / materials on expeditionary studies), etc.

(c) The nature of the engagement is usually informal (there being no signed contracts, etc.) but limited either to a one-off session / interview, etc. or to a specific period of time, e.g. the duration of a dig or expedition. We do insist, however, that signed receipts are provided by the recipients of payments in support of claims submitted.

What I would propose, to be absolutely clear, is that a number of conditions must be satisfied by the researchers engaging such individuals. These would be, in each case:

1. The recipient of the payment from the University researcher (or equivalent) is not a UK resident nor a UK taxpayer;

2. The services for which the payment is made are supplied outside of the UK and are wholly and necessarily for business purposes, i.e. no element can be put to private benefit;

3. A dated receipt is provided, signed by the recipient of the payment made.