Benefits in Kind That Are Fun – And Tax Free!

Alan Pink

Our friend the taxman is of rather a puritanical bent, normally, and the tax rules tend not to favour anyone actually enjoying themselves. However, there are one or two ways in which your employer can provide you with tax free benefits that you will actually enjoy, and if you are effectively the employer as well as the employee, of course, so much the better, because then you can benefit from the tax breaks on both sides!

1. Staff Entertaining

Remember, first of all, that this works even if you are your own only “staff”. A company can provide its staff with entertaining and hospitality of various kinds and get tax relief for the expenditure, as well as being able to get the VAT back. If this entertaining is in the form of some kind of staff function, like a Christmas party or a Summary barbeque, there’s no taxable benefit on the staff providing the expenditure isn’t more than £150 per head per annum.

In practice, a lot of casual entertaining actually goes on, other than at formal staff events, which doesn’t get taxed on the employees concerned as a benefit in kind. Strictly speaking of course, we shouldn’t be advocating taking advantage of this laxity in practice, but you know how these things work.

Another way you can get benefit out of your company tax free is if the entertaining concerned is actually business related. That is, if you’re taking out an important customer, client, or supplier of the business, the most lavish lunch at the poshest hotel won’t be put down to you as a taxable benefit that needs to be entered on your tax return. Best to book that table at the Ritz now!

The quid pro quo for this fairly generous relief is that the employer can’t, of course, claim tax relief for entertaining non staff members in his own profit and loss account.

2. Sporting Facilities

This is really one mainly for the larger employer, but sporting facilities which are peculiar to the staff of a particular business can be provided tax free as well.

You might think the sporting facilities exemption could be stretched to apply to the swimming pool at the director/shareholders’ house, but the taxman has thought of this. No facilities provided on “domestic premises” can be exempted from tax in this way. There’s no reason, though, why separate premises used by the business should not incorporate gym, sporting, and swimming etc facilities, even if there are only two employees of the company concerned. Providing the facilities are provided “generally” to those two employees, which is one of the criteria, the exemption is available.

3. Free or Subsidised “Canteens”

This particular tax exemption has proved very popular in practice; it seems, in fact, from the Revenue’s point of view, too popular.

If free or subsidised meals are provided on the employer’s own premises, and they are “reasonable” in scale (whatever that means), and they are generally open to all of the employees at that location, then the benefit is tax free.

Alternatively, you can get tax free meals in a “canteen” which isn’t part of the employer’s premises.

How far can the word “canteen” be stretched? Well, to judge from the Revenue concession that this law was originally based on, it wouldn’t qualify as a “canteen” if you simply took everyone down to the local pub or restaurant. There is certainly an implication that the premises concerned are available only for the staff and not for the general public to come in and buy meals etc. However, there seems no reason why a friendly publican or restaurateur should not set aside a part of his premises for the company’s employees only, if it’s made worth his while.

The reason, incidentally, why we expressed the view, just now, that this particular tax exemption might have become “too popular”, is because the Revenue have just published a statement to say that abuse of the “salary sacrifice” arrangements in connection with this exemption was leading them to withdraw it where it depended on a salary sacrifice, that is the employees agreeing to take a reduction in wages or salary in return for being given the tax free canteen or meal facilities.

There’s always someone who takes these things too far, and the reaction on the part of the rest of us ought to be annoyance – that we didn’t think of it first!

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