Tax and National Insurance free benefits and expenses
There are some benefits and expenses an employer can provide which are genuinely free of tax and National Insurance (NI), some of which have qualifying conditions.
As with all taxes, the context is everything and tax and NI may be due depending on the circumstances surrounding the provision or payment of the benefit or expense.
No P11D return required if the qualifying conditions are met
1. Company provided mobile phone
Qualifying conditions – the contract must be with the employer.
2. Employer pension contributions
Consider a salary sacrifice arrangement.
- 3. Group life assurance cover
Qualifying conditions – to provide a lump sum on employee death – professional advice required.
4. Interest free loan
Of up to £10,000.
5. Annual employee function(s)
Qualifying conditions – up to £150, (inc vat) per head, must be annual. If more than £150, the total amount is liable for tax and NI. Can be split between more than one “do”. It must be open to all.
6. Employer provided childcare
Qualifying conditions – must be generally available to all staff and relief is capped.
7. Childcare vouchers
8. Car parking
At or near the normal place of work. Can also be used in a salary sacrifice scheme.
9. Staff training
This includes childcare costs and training materials. Consider a salary sacrifice scheme.
10. Professional subscriptions
Check List 3 on HMRC’s website https://www.gov.uk/government/publications/professional-bodies-approved-for-tax-relief-list-3
11. Relocation expenses up to £8,000
Qualifying conditions – there are too many to generalise – please get in touch if you would like to know more.
12. Food provided in a workplace canteen
Qualifying conditions – must be open to all employees, and not under salary sacrifice.
13. Uniforms and workwear that has a company logo
14. Long service awards
Qualifying conditions – minimum of 20 years’ service; non-cash; value up to £50 per year of service and no previous award in the last 10 years.
15. Trivial benefits
These may be for example, flowers, chocolates or a bottle of wine. At the moment, HMRC won’t give a value but from 6th April 2016, an employer will be able to provide a gift of up to £60, tax free, as long as the gift is not in recognition of good work or performance on the job. Directors, shareholders and their family members will only be able to have six of these gifts per year.
16. Working from home at £4 per week
Qualifying conditions – there must be a home working agreement.
17. Welfare Counselling
This can be for ill health/stress, harassment, sexual abuse, equal opportunities, alcohol/drug dependency, bereavement, personal relationship problems or debt; but not advice on tax, the law, finances (other than debts), leisure or recreation, or health matters.
18. Medical check up, health screening and eye tests
Qualifying conditions – eye test cost only if employee uses a VDU. If glasses are needed for computer work, the cost of glasses is also allowed.
19. Seasonal flu jabs
This comes under the trivial benefits exemption.
20. Disability aids
To enable an employee to perform their duties of employment. Can be used privately.
21. Vans that are not used for private travel except for home to work, including shared vans
Qualifying conditions – HMRC insists that a mileage log is kept for all travel. We recommend a change to the employee’s contract to ban private travel
22. Pooled cars and vans
Qualifying conditions – the vehicle must not be parked at an employee’s home overnight and the vehicle must be available for all employees to use.
23. Mileage rates for business use of own car, motorbike and cycle at 45p, 24p and 20p per mile respectively for the first 10,000 business miles in the tax year.
24. Mileage rates for business use of a company car
See advisory fuel rates https://www.gov.uk/government/publications/advisory-fuel-rates
25. Incidental overnight expenses
Qualifying conditions – up to £5 or £10 a night for overnight stays in the UK or abroad, respectively.
26. Staff suggestion schemes
£25 for a suggestion that has intrinsic merit, and up to £5,000 if there is a commercial saving to be made.
Qualifying conditions – This must be run as a proper scheme according to HMRC rules.
A P11D return is required unless these items are included in a dispensation
1. Car parking, congestion charges and tolls when out on a business journey
2. Business travel
3. Travel to a temporary workplace
Qualifying conditions – if an employee has been seconded to a temporary workplace, i.e. less than 24 months, but see HMRC’s 490 book. Good records must be kept of these expenses as this is another of HMRC’s pet targets.
4. Subsistence costs
i.e. refreshments, meals and accommodation only where there is a business journey
5. Day subsistence allowances
Flat rate allowances at £5 and £10 if away for more than 5 or 10 hours respectively
6. Company credit cards
Even if it is only used for business expenses
7. Business entertaining
Good records must be kept to show who was there, the reason for the entertainment, when it took place and what it cost.
The information in this document is as at December 2015 and is subject to change.
For your solution contact the BHP Employer Consulting Team.