Tax Free Perks
The Government has continuously sought to limit the tax free perks that businesses can provide for their employees. However, there are some remaining. Here is an update on some of those still available.
Childcare provision and childcare vouchers up to a weekly maximum 'appropriate amount'. The system has changed for new entrants to an employer scheme from April 2011. See details here.
The childcare tax allowance scheme came into effect in 2015.
There is no benefit in kind on the provision of a mobile phone to an employee, although this can prove an expensive perk to provide. If additional mobile phones are provided (e.g. where they are given to family members also), only one is exempt - you can choose which one.
Employees can be paid up to £3 per week (unchanged since 2008/9) to cover the extra costs of working from home (not including business telephone calls). No receipts need to be kept. Employees can claim amounts in excess of this allowance via their tax return; however, evidence of the amounts spent will be required.
No benefit in kind is chargeable on Christmas Parties and other employee functions, up to a maximum of £150 per head. The function has to be an 'annual event' and open to all employees to qualify for the exemption. The rules where more than one such function is held are complex - see HMRC's guidance for further information.
Subject to certain conditions, subsidised canteens create no taxable benefit. Luncheon Vouchers up to 15p per day are tax free.
You can pay employees up to £5 per overnight stay in the UK or £10 if the business trip is abroad. A HMRC offers guidance on subsistence payment in the UK here and abroad here. The rates were revised in February 2019.
It is often forgotten that the use of a qualifying pool car is not a taxable benefit, nor is free parking at the workplace.
Payments for travelling expenses in connection with work can be made according to 'scale rates' published by HM Revenue & Customs (HMRC). There are separate rates for cars, motorcycles, and bicycles and even for passengers sharing a car.
Share Incentive Schemes
There are a number of share incentive schemes which can be used to provide tax free benefits. Share Incentive Plans allow companies to give up to £3,000 worth of 'free shares' each year to employees. Recently, the Government has annoucned its intention to restrict the terms of such schemes.
Long Service Awards
Non-cash awards for long service are tax free for employers, as long as the award marks at least 20 years' service and the employee has not received any previous long service awards in the last 10 years. Benefits of up to £50 per year of service are tax-free: if the benefit is worth more than this, only the excess over £50 is taxable.
Employers' Pension Contributions
Payments to approved pension schemes, on behalf of employees, are not taxable.
Interest Free Loans
Loans of up to £5,000 can be made to employees without attracting a tax charge on the notional interest.
These are not normally taxable when paid by the employer, as long as the organisation being subscribed to appears on HMRC's List 3.
These are tax free, provided they are available to all employees (and aren't available to the general public).
The relocation expenses for employees who move in connection with their work can be paid, subject to limits.
Providing tax free benefits in kind can be an excellent way to increase staff motivation and attract and retain key employees. Employers should look at the range of options open to them to tailor attractive remuneration packages for their staff.
Vouchers not exceeding £50 each in value may be given to employees in a tax year. The vouchers must not be able to be encashed.