I’ll sacrifice!I’ll sacrifice!Generally, HMRC are not eager to give away tax savings. However, the tax rules for employees contain certain exemptions that it would be foolish to overlook if they are appropriate to your business and which can make tax and national insurance savings.
Examples of common tax-free benefits for employees include:
Childcare - third-party childcare costs, including the provision of vouchers, can be met by the employer of up to £55 per week for both parents. Workplace nurseries are completely tax-free but less common.
Vans - ordinary commuting and insignificant private use in an employer-provided van mean that the provision of the van is tax-free.
Mobile phones - for phones provided from 6 April 2006, unlimited private use of one phone per employee and their family.
Computers - provided from 6 April 2006 primarily for business reasons.
Car parking - at or near the employee’s normal place of work.
Loans - of up to £5,000 at any one time and for any purpose.
Accommodation - if necessary to perform the job, customary in that sort of job or for security reasons.
Bicycles - an employer-provided bicycle mainly for home-to-office journeys means the provision of the bicycle is tax-free.
Annual functions - up to £150 per person per tax year if open to employees generally.
Relocation expenses - of up to £8,000 if obliged to move because of work.
Employer pension contributions - up to £215,000 (less employee’s contributions) in 2006/07.
Long service awards - after 20 years, tangible articles with a value of up to £50 per year for each year of service.
And of course luncheon vouchers of up to 15p a day!
These tax-free benefits can be combined with ‘low cost’ benefits, such as low emission cars, to maximise savings. They can be given in addition to, or instead of, existing salary arrangements, the latter route usually be referred to as a ‘salary sacrifice’. This would involve a change of employment terms to give up pay for a tax-saving benefit.
Obviously, HMRC are keen to check that things have been done correctly, so please talk to us to discuss your remuneration policies in detail and keep you out of the taxman’s bad books!