Benefits in kind…what does it actually mean and is it worth investing time and money in? Well, benefits in kind, or “perks” is separate to salary or wages. Commonly these include company cars, childcare vouchers, health insurance, company credit cards, pension schemes, cycle to work schemes, gym memberships, or any vouchers given by employers. If you’re an employer then it’s worth considering the value of these as an incentive to attract employees, keep your team satisfied, or even as a tool to improve the health and lifestyle of your employees.
However, the provision of benefits and incentives to employees will have a cost to your business and most financial rewards (cash and non-cash) provided to employees will also have tax and national insurance contributions (NIC) implications for them.
Trivial benefits
Employers can give small gifts and entertainment without reporting this to HMRC. These are to show gratitude for good work, but they cannot be seen as a bonus, cannot exceed £50 in value per-gift, cannot be paid in cash, or be part of a contract. Trivial benefits can be gift cards, bottles of wine or hampers, and can also include meals. See our factsheet for further details:-www.hghyork.co.uk/factsheets/?op=/factsheets/employment-tax/employment-benefits
Other ways of providing non-taxable benefits to incentivise employees include:
- Interest free loans of up to £10,000
- The provision of a parking space at or near the employee’s normal place of work
- Personal incidental expenses of up to £5 a night can be paid by the employer when the employee is away from home on business
- The provision of bicycles and equipment for mainly home to work travel
- Annual parties and functions open to staff generally if the annual cost per head is less than £150
- Employer pension contributions. Generally, the minimum employer contribution is 3% but an employer can contribute more, possibly in conjunction with a salary sacrifice scheme. The minimum employee contribution is 5% but the employer could offer to pay more to cover some of the employee’s contribution in return for a lower cash salary
- Meals provided to the employer’s staff generally
- Mobile phones limited to one phone per employee or a non-cash voucher to make a phone available to an employee
- Long service awards which consist of a tangible article to a value of no more than £50 per year of service can be made after at least 20 years’ service
- Workplace nursery places for employee’s children
How we can help
The taxation of employment benefits is a complex area. Ensuring that you comply with all the administrative obligations and plan in advance to minimise tax liabilities is essential. We can help you with the following:
- reviewing existing employees’ remuneration packages for tax and NIC efficiency
- planning flexible and tax efficient remuneration packages for key employees within your organisation
- advising on systems for reimbursing expenses and checking procedures
- help on applying for bespoke scale rates
- providing advice and assistance with the completion of your PAYE returns
- negotiating with HMRC if disagreements arise and in reaching settlements.
If you would like advice on planning and compliance matters relating to employment benefits, please contact a member of our tax team via our website www.hghyork.co.uk, by emailing claire.hodsman@hghyork.co.uk, robert.salenius@hghyork.co.uk or paul.morris@hghyork.co.uk. Or call us on 01904 655202.
