Prior to 6 April 2016 charities could apply for a dispensation – a notice from HMRC that removed the requirement to report expenses and benefits on form P11D.

Dispensations were abolished on 6 April 2016. Almost all expenses or benefits that might previously have been covered by a dispensation will be covered by an exemption from tax.

The charity may reimburse expenses that fall within the exemption in one of three ways:

1. On an actual, receipted basis
2. At the approved benchmark scale rates as set out in HMRC guidance
3. At rates agreed with HMRC under a bespoke agreement

Round sum allowances previously included in a P11D dispensation are not covered by the exemption from tax unless the charity has agreed those rates under a bespoke agreement post-April 2016. If a charity wishes to pay a round sum allowance free from tax and NICs from 6 April 2016 that was previously included in a P11D dispensation it must apply for an approval notice to continue to pay that rate. If no approval notice is in place, payment of a round sum allowance must be subject to tax and NICs.