Tax-Free Benefits for Employees - Moore and Smalley

There is no doubt that this year has turned into a difficult year for ordinary workers, and one of the most common questions we see from caring employers has been “How can I help employees with the cost of living”.

Regarding benefits in kind and expense reimbursements, we have put together our top 5 suggestions.

Maximising your tax-free expenses payments

Reimbursement of business travel expenses incurred in a privately owned car can be at a maximum of £0.45p per mile for the first 10,000 miles, after that £0.25p per mile, tax and NIC free.

For company car drivers, the rates are published quarterly, known as the advisory fuel rates. Maximising these rates will not incur any PAYE/NIC for the employee, and the employer will not have a NIC liability.

Christmas parties

The annual party exemption allows the employer to pay for a morale-boosting annual party without the employee picking up an unexpected tax bill.

The employer should ensure that there is an annual party and that the costs of the party, including transport and accommodation, are within the £150 per attendee limit.

Be careful though as breaching the limit will incur a taxable benefit in kind on the whole amount, therefore precise records need to be kept. The party must be available for all employees to be able to attend, even those with a Bah humbug attitude!

Electric Company Car

The average car owner spends around £3,500 a year on owning and maintaining a car.

Employers can offer an electric company car via a salary sacrifice scheme.

The employee can then benefit from the tax and NIC reductions and take advantage of the continued ultra-low taxable benefit in kind on an electric car. The scheme can even be operated in such a way as to avoid a cost to the company.

Business Mobile Phone

Employers can provide a company-contracted mobile phone for business and not incur a benefit in kind on the employee, even if used privately by the employee.

Trivial Benefits in kind

There is no tax and NIC liability on the provision of a trivial benefit in kind. This will cover high street vouchers for instance. There are a few conditions to consider such as:

• It cannot be cash or a cheque
• The cost to the employer must not exceed £50 (VAT inclusive)
• It is not part of a salary sacrifice scheme
• The benefit is not provided in recognition of particular services performed by the employee. (e.g a Christmas/birthday/birth of a child would be OK. An employee of the month/performance target rewards would fail)
• For close companies (those with 5 or fewer participators (i.e. shareholders), or a company of which all the participators are also directors) there is an annual limit of £300 per director.