Dispensation covered employee subsistence payments

HMRC entered into a dispensation (ITEPA 2003 s 65) with the taxpayer to cover employee subsistence expenses (ITEPA 2003 s 337 to s 338).

However HMRC later raised determinations under the Income Tax (PAYE) Regulations 2003 reg 80 and Social Security Contributions (Transfer of Functions) Act 1999 s 8 for subsistence claims made under the dispensation for 2013-14 to 2015-16. This was because according to HMRC the taxpayer’s expenses system provided employees with a ‘large profit’ and was part of a marketing strategy to attract workers.

HMRC considered that the expense payments were round sum allowances chargeable under ITEPA 2003 s 62 so not covered by the dispensation or alternatively that the dispensation conditions had not been met.

The taxpayer appealed.

The First-tier Tribunal did not agree that the payments were round sum allowances. Having ‘evaluated the evidence’ the tribunal...