A dispensation is basically a way of reducing paperwork as the granting of a dispensation relieves the employer (umbrella) from having to complete P11D's, saving time for both the company and the HMRC. A dispensation is an agreement between the HMRC and a company (not just Umbrella Companies), that allows the company to offset an agreed amount of expenses without having to provide details of them to the HMRC.
The dispensation does not allow the Umbrella Company to allow expenses where no real expenditure has taken place, nor does it mean that the individual should not keep receipts for all business expenditure. Put simply, receipts are your 'insurance' if the HMRC investigate you, you will need to be able to provide proof of these expenses.
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