Umbrella Company Dispensations – Exposed!
Have you contacted an Umbrella Company or spoken to your friends and colleagues about Umbrella Companies? If so you will have almost certainly heard the term ‘dispensation’. So, what exactly does it mean?
Well, HMRC’s definition is “a dispensation is a notice, issued by an Inspector, which relieves you from reporting details of expenses and benefits on forms P11D or P9D”
According to some Umbrella Companies, a dispensation is a great way for contractors to increase their take home pay without even having to pay out for any ‘expenses’ in the first place.
The first explanation only helps if you know what a P11D or P9D is; the second sounds great but is totally misleading.
OK, so what is a dispensation?
Almost all Umbrella Companies have them because they save time and therefore money. If you don’t apply to HMRC for a dispensation, you have to record every single expense that every single contractor claims on a form which is called a P11D; as well as that every single expense has to be accompanied by a receipt.
So, can you claim whatever is on the Umbrella Company’s dispensation as an expense every day even though you haven’t spent anything?
No, of course not! You can only claim as an expense, what you have spent and that cost must be wholly and exclusively incurred because of the contract.
Is the dispensation the ‘HMRC approved’ expenses policy that you keep hearing about?
No. HMRC don’t approve anything – let alone expenses policies! The dispensation is just to save time.
For more information on what expenses you can or can’t claim through an Umbrella Company, please call 01206 713680 or email us at info@contractorumbrella.com
Click here to read our latest reports on dubious expense claims and 100% take home pay claims.
