Does an Umbrella Company Dispensation help Me

An HMRC dispensation is there for the benefit of the umbrella company and HMRC, not the contractor.

Does A Dispensation Matter?

If an umbrella company has a dispensation it means very little, if nothing at all, to you as a contractor.

Any company can apply for a dispensation from HMRC. The BBC has a dispensation as does Shell as does HSBC as does almost every company listed on the stock exchange.

In fact the majority of UK businesses have applied for a dispensation and HMRC have granted them one.

So Very Unremarkable

An umbrella company with a dispensation is not remarkable at all. What might make ‘page 14 of a newspaper' - if at all, is if an umbrella company doesn't have a dispensation.

• "A dispensation is an administrative tool which benefits HMRC and the umbrella company. It is not meant to benefit the contractor - and it doesn't benefit the contractor in any meaningful way." Stephanie Buck, Director, JMK Group UK.

The Reality

At the end of the year an umbrella company doesn't have to record the contractor's expenses in their tax return - that's the single main benefit to umbrella companies.

1. If an umbrella company has a dispensation it does not mean a contractor can claim for expenses which otherwise they wouldn't.
2. It doesn't mean their contractors can pay less tax.
3. It certainly does not mean they are in any way protected from an HMRC investigation.

Who Gets The Benefit?

No. 1: HMRC. No. 2: The umbrella company.

If an umbrella company (the employer) does not have a dispensation it would mean that at the end of the year it would have to complete an HMRC form, called a P11D, for every single one of its contractors (the employees).

It would also mean that HMRC would have to check each of these P11D's.

This amounts to an awful lot of administration for both your Umbrella Company and also HMRC.