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An A to Z of benefits that can be provided tax-free
15 October 21 | By: Jas Jhooty
This week we are providing a handy summary of those employer provided benefits that do not have to be reported to HMRC:
A-Z of common exempt benefits
If the employer has any canteen/foodmaking facilities at any of their sites then they can apply for the canteen exemption for all food provided to employees while they are onsite. There are special rules for employers that are in the catering & hospitality industries, whereby a designated table must be set aside for staff’s use to consume any free food provided
Historically the first £55 per week relating to childcare costs can be paid tax-free as long as these are restricted to 20% tax relief. Employers have to perform a Basic Earnings Test at the start of each year to guestimate the marginal tax rate of their employees and restrict this tax free amount to £28 pw of they are a 40% taxpayer and £25 pw if their tax rate is 45%.
The cost of annual functions costing up to £150 (inc VAT) per head is exempt from tax.
Equipment for disabled employees
Any equipment that you provide to a disabled employee that enables them to perform their job is also exempted from tax. You can also pay to have their company car adapted for their disabilities without the cost of these adoptions counting towards the price of the car for tax purposes.
Where an employee works regularly at home, under agreed flexible working arrangements, an employer may now pay up to £6 per week, £26 per month/ £312 per year with effect from 6 April 2020 without supporting evidence of the cost.
Job related accommodation
Not all employer provided living accommodation is taxable. If an employee has to reside there in order to better perform their duties of employment (e.g. pub landlord, caretaker) then there is no tax to pay. Similarly, if it has become customary for a particular occupation to receive free living accommodation over time, (e.g. armed forces) barracks then again there will be no tax to pay.
The last category is of there is a specific security threat and the employee is put into a safe house then this can be provided tax-free as well. NB company directors can only receive obtain tax-free accommodation under this provision.
Late night home to office travel
HMRC allow employers to pay for an employee’s journey home tax-free on the occasional occasion (up to 60 times per year) that they have had to work late (after 9pm).
Long Service Awards
HMRC’s definition of Long Service seems particularly antiquated in the modern jobs market. Tax-free Long Service Awards of up to £50 per year, can only be made after 20 years of service and then again after ten year intervals. Employers must not make these awards in the form of cash/cheques or vouchers. Instead the employee should choose a gift (from a catalogue/internet shopping site) that they want up to value of the tax-free Long Service award and the employer then proceeds to purchase it.
Medical treatment abroad
If you are sending an employee abroad for work purposes you can pay for either medical insurance or treatment for the period whilst they are working outside of the UK for business purposes tax-free.
See this article for details of other tax free medical costs that you can pay that are tax-free.
Mileage allowances up to published AMAP rates for privately owned vehicles
Employers are allowed to pay up to the published Approved Mileage Allowance Payments (AMAP) rates of 45p per mile up to 10,000 business miles and 25ppm thereafter for business travel in a personally owned car/van. An additional 5ppm can be paid per additional work colleague who is a passenger in their vehicle.
Some employers pay less than the full amounts detailed above and their employees can relatively easily claim tax relief on the difference between what was actually paid to them and the AMAP rates. This can be achieved by pointing interested employees to complete HMRC’s form P87. Employees can go back over the preceding 4 tax years if they wish to claim tax back with interest.
There has been a tax exemption for the provision of an employer provided mobile phone This has also been extended to smartphones/tablets.
Office Supplies and equipment
Any office supplies that you provide to your employees to enable them to carry out their duties of employment are exempted from tax.
Any costs incurred in arranging for an onsite nurseries or play groups that are provided for the children of employees bear no tax liability.
Onsite sports facilities
Any onsite sports facilities are tax free as long as they are only available for employees and members of their households.
The costs of providing parking spaces at or near an employee’s place of work can currently be paid tax-free.
Payments of up to £5,000 can be made to contributors whose Suggestion Schemes. ideas have resulted in demonstrable savings
An employer can arrange for pretty much any work related training that they deem to be work-related to be provided tax-free. If an employee is being made redundant, the employee can also pay towards any re-training costs.
From 2016/17 employers can provide trivial benefits costing up to £50 (inc VAT) (e.g. flowers/chocolates to employees to celebrate a life event) as long as the gift is not given as a reward for their work performance.
General welfare counselling is exempt from tax as long as it is not related to any medical treatment or any personal financial or legal advice
How emTax can help
More detailed information on tax exempt benefits can be found in Chapter 5 of HMRC’s Booklet 480.
If you want any more information about benefits and expenses, please do not hesitate to contact us.