What workplace benefits are taxable?
QUESTION: I'm keen to introduce a flexible, tax efficient remuneration package for key staff within my company so I am reviewing existing employees' remuneration packages for tax and NIC efficiency. Are all benefits given to employees taxable, or are some tax free? It would be very helpful to know what tax free benefits we can provide to our staff.
ANSWER: Today the remuneration of many directors and employees comprises a package of salary and benefits. Essentially two tests must be applied in determining the tax implications of any benefit. Firstly, is the benefit taxable and if so, what is its taxable value?
All earnings of an office or employment are taxable. Where they are not in cash it becomes necessary to put a value on them. As a general rule, unless the benefit can be converted into cash there is no taxable benefit, but if it can be converted into cash the taxable amount is the resale value.
To prevent tax avoidance legislation charges some benefits to tax and employers are required to notify HMRC of these benefits by completing forms P11D annually. Penalties can apply where the forms are submitted late or are incorrect and the full amount of any benefit must be reported on the form.
Certain benefits are not taxable. The most important ones are retirement benefits which are paid by an employer into a registered pension scheme; meals provided in a staff canteen; drinks and light refreshments at work; parking provided at or near an employee's place of work; workplace nursery places provided for the children of employees; certain other employer-supported childcare up to £55 per week.
Others include: in-house sports facilities; payments for additional household costs incurred by an employee who works at home; removal and relocation expenses up to a maximum of £8,000 per move; the provision of a mobile phone or vouchers to make available a mobile phone; annual social functions for employees provided the total cost of all events in a tax year is less than £150 per head; and trivial benefits up to £50 or £300 per annum in close company situations.
The following benefits are taxable on all employees: any living accommodation provided, unless job related; vouchers and credit tokens.
In addition, special rules apply to tax other benefits received by directors and all but the lowest paid employees. Common types of taxable benefits are: employer-provided cars (this is probably the most common benefit and the taxable amount will generally be based on a range of 13 per cent to 37 per cent of the manufacturer's list price); private fuel; a van; cheap or interest free loans (no benefit will be taxed where the loan does not exceed £10,000); medical insurance; use of company assets; and phones.
The taxation of employment benefits is a complex area. Ensuring that you comply with all the administrative obligations and planning in advance to minimise tax liabilities is essential.
:: Janette Burns (email@example.com) is associate director at PKFFPM (www.pkffpm.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.