Tax Factor
18 November 2010
Christmas is coming
Well, maybe not quite yet, but it's certainly not too early to be planning your staff celebrations for this year. In these cash-strapped times we take a look at some of the tax efficient ways employers can boost staff morale during the festive season and beyond.
Everyone loves a good party and provided the costs don't exceed £150 per head then there will be no adverse tax consequences for your staff. Exceed that figure and the whole cost becomes a taxable benefit, and if you don't want to take the shine off of the event with a nasty shock for your employees later on then you will need to pick up the tax and NIC bill on their behalf.
The tax exemption applies to the cost of one or more annual social events which are open to all employees (which can mean all employees of a particular department or at a particular location, if appropriate) provided the total spend is no more than £150 per head in the year.
But if, like the Queen, you don't think a staff party seems to be quite appropriate this year then what else could you do? After all a party is just for Christmas so how about a tax free benefit that will help show your staff that you value them all year round?
You might like to consider some of these:
Health screening and medical check ups
A healthy workforce is a happy workforce. Employers can provide one health screening assessment and one medical check-up per employee in any one year in order to identify employees who are at risk or to determine their state of health. The tax exemption does not cover the cost of treatment but if a problem is discovered at an early stage this may benefit both employee and employer in terms of suffering and lost work days.
Payments towards additional costs incurred by employees who work at home
With increasing commuting times and costs home-working is a much more common occurrence these days. Employees who work at home by agreement with their employer instead of at their premises may receive payment for the additional household costs they incur as a result. The employer may pay up to £2 per week without requiring the employee to keep supporting evidence of the cost, although more than this can be reimbursed if the employee can provide evidence to support this or, if there are a number of employees in this situation, you have agreed a higher figure with HMRC.
Long service awards
Provided an employee has been with you for at least 20 years, and has not received a similar award within the last 10, then why not reward that loyalty with a gift? Provided this is a tangible article (so not cash) costing no more than £50 for each year of service, or is made in the form of shares in the employing company (or another company in the same group), then the gift can be made tax free.
Suggestion scheme
The scheme must be open to all and awards must be for suggestions relating to the activities of the employer but be outside the scope of the employee's normal duties. Suggestions made at a meeting held for the purpose of proposing suggestions should not be considered under the scheme.
Encouragement awards of up to £25 can be made tax free to an employee who makes a suggestion which has some special merit or reflects praiseworthy effort. Any amount in excess of £25 must be taxed.
If a suggestion is actually implemented and the improvement in efficiency or effectiveness can be measured by prospective financial benefits to the business and the importance of the change to the business then a more substantial award can be made tax free. This can be up to 50% of the expected net financial benefit arising in the first year the suggestion is implemented or up to 10% of the expected net benefit over the first five years, subject to an overall maximum of £5,000.
These are just some of the benefits which can be provided free of tax. For advice on implementing any of the above or on determining whether other benefits are taxable please connect any Wilkins Kennedy office.
