Salary isn’t the only way businesses can reward their people.
There are a number of employee benefits which can potentially be provided without creating the Income Tax and National Insurance consequences you might expect — provided the relevant conditions are met.
Here are seven worth knowing about.
- Trivial benefits
The name might not sound exciting. The rules can be surprisingly useful.
A benefit can potentially qualify as a tax-free trivial benefit where:
- It costs the employer £50 or less to provide
- It isn’t cash or a cash voucher
- It isn’t provided as a reward for work or performance
- It isn’t something the employee is contractually entitled to
That could potentially cover things such as a birthday gift or another small gesture.
For directors of close companies, an additional annual cap applies: qualifying trivial benefits provided to the director or members of their family or household are limited to £300 per tax year.
So yes, your company might be able to buy you a birthday present.
- The annual staff party
Even HMRC believes in a Christmas party.
An exemption can apply to annual parties and similar functions where they are open to employees generally and the relevant conditions are satisfied.
The key figure is £150 per head.
One important trap: £150 is an exemption, not an allowance.
If the relevant cost of an event exceeds the threshold, you don’t simply deduct £150 and tax the excess.
If you’re planning more than one annual event, the rules become more important still.
Probably worth checking before somebody upgrades the Christmas party package.
- A company mobile phone
An employer can potentially provide an employee with one mobile phone or SIM without creating a taxable benefit, subject to the relevant conditions.
This is different from simply reimbursing an employee’s personal phone contract, so getting the arrangement right matters.
- Workplace parking
Parking at or near an employee’s workplace can potentially be provided without creating a taxable benefit.
Not the most glamorous employee perk we’ve ever discussed.
Anyone who has tried to park in a busy town centre may disagree.
- Work-related training
Relevant work-related training can potentially be provided tax-free.
That can include training designed to develop skills relevant to an employee’s role and certain associated costs, subject to the rules.
For growing businesses, investing in employees can therefore have benefits beyond simply improving skills.
- Professional subscriptions
Certain professional fees and subscriptions can receive favourable tax treatment where the relevant conditions are met.
The treatment depends on factors including the organisation involved and the relevance of membership to the employee’s job.
If you’re paying professional subscriptions for your team, it’s worth making sure they’re being treated correctly.
- Homeworking equipment
Where employees work from home, employers can potentially provide certain equipment, services and supplies without creating a taxable benefit where the relevant conditions are satisfied.
That can include items such as laptops and other equipment required for work, provided the rules around business and private use are met.
What about pension contributions?
Employer pension contributions can also be a highly tax-efficient part of an overall remuneration package.
However, pensions have their own set of rules and allowances, so they deserve more consideration than simply adding them to a list of “tax-free perks”.
For company directors in particular, pension contributions can be worth discussing alongside salary and dividends as part of wider remuneration planning.
Small benefits can make a big difference
None of these individually will transform a remuneration strategy.
Together, however, well-designed employee benefits can help businesses:
- Reward employees
- Support recruitment and retention
- Make remuneration packages more attractive
- Avoid unnecessary tax costs
- Get more value from existing staff expenditure
The important part is getting the conditions right.
Are you making use of the available exemptions?
Business owners understandably focus on the big numbers.
Sometimes it’s worth looking at the smaller ones too.
Barrons can review your existing employee and director benefits and help identify whether there are opportunities you’re currently overlooking.
Turns out tax planning isn’t always about taking things away. Sometimes it’s about the perks.
Speak to the Barrons Tax team to find out more.
Tax exemptions are subject to qualifying conditions and individual circumstances. This article provides general information only and should not be treated as tax advice.
