There are relatively few tax free benefits available to employees now,
so for the self-employed working through their own limited companies it
is important to take full advantage of those that do exist. The most
important ones are as follows.
Pensions
Employer contributions are tax free and are especially useful for self-employed persons at risk of IR35 assessments or whose profits exceed the corporation tax threshold of £300,000. Provided they are contractual payments (a board minute will do as service contracts may make you subject to the minimum wage regulations) the company can claim them against corporation tax and they will be tax free benefits subject to an annual cap of £245,000. However, they may be disregarded by your local corporation tax office if they are seen as unusual one-off payments, so it is always best to check first. Come and speak to us if you are in any doubt.
There are also anti-avoidance measures in place to prevent people
topping up their pensions ahead of the proposed restrictions on tax
relief for those earning more than £150,000 a year that are due to
come into effect on 6 th April 2011.
See our information sheet on Pensions for further details.
Childcare Allowances
Any payment from your employer in respect of childcare costs is tax free up to the first £55 per week under Section 318A of ITEPA 2003. Both parents are entitled to this tax break but you can only use it for one child each. The allowance can either be in the form of childcare vouchers or as a direct payment to a nursery or registered childminder. Vouchers can be produced in-house and have no time limit, but they must be formally accepted by the nursery.
Latest news - if you want to take full advantage of childcare vouchers or set up a scheme for your staff, you may need to do so by 31st March 2011.
Gordon Brown has now scrapped his original proposal to remove tax relief on these benefits but will limit it to basic rate only with effect from 1st April 2011, so higher rate taxpayers will not get full tax relief. Apparently this will not apply to existing schemes however, so our advice is to make sure your scheme is in place by that date.
See our information sheet on Childcare for further details.
Mobile Phones
Your are allowed to have one tax free mobile phone from your company and make as many personal calls on it as you like. However, make sure both the contract and the bills are in the company name and that it was provided mainly for doing your job.
See our information sheet on Mobile Phones for further details.
Workplace Parking
Your employer is allowed to provide you with free parking, pay for parking permits at or near your place of work or reimburse you for the cost of parking at or near your place of work under Section 237 of ITEPA 2003.
See the Parking Permits section on our Other Personal Expenses information sheet
Meals and Refreshments at Work
Staff canteens are still tax free and, believe it or not, you are still entitled to luncheon vouchers up to a value of 15p per day, although this limit has been frozen since the 1980s and now wouldn’t even buy you a banana! For most small companies, the main use of this exemption is for refreshments such as tea, coffee, water, biscuits, etc, provided they are available to all employees generally. Even if the exemption did not apply, such small items would be regarded as trivial benefits not subject to tax. You could probably also get away with sandwiches in the office every now and again, but working lunches are definitely not allowed and should be recorded as staff entertainment.
See our information sheet on Entertainment for further details.
Sports Facilities
Sports facilities provided by employers for their staff are tax free provided they are available generally to all employees, not generally available to the public at large, not provided on domestic premises and not related to the use of any holiday or overnight accommodation. It is permitted for groups of employers to club together for the provision of sports facilities and even local residents can use them provided public access is restricted to them and/or certain other identifiable groups.
This can be a difficult exemption for most small companies to take
advantage of as few have the space to provide sports facilities even if
they club together, and membership of local fitness clubs would not
normally qualify as they are open to the general public. However, you
could club together with other employers to reserve the club for your
own use on a certain day each week. You could also hire a personal
trainer to devise fitness plans for all employees. The sports facility is then the personal trainer. If you and your partner are the only
employees, this could enable you to put what is essentially a private
expense through the company tax free. It would also be deductible
against corporation tax.
Removal & Relocation Expenses
Employees joining a new organisation or re-locating within an organisation may be entitled to tax free assistance with their moving costs. The main conditions are that a) the employee must not previously have been living within reasonable travelling distance of their new workplace, b) their new address must be within reasonable travelling distance of their new workplace, and c) the move must be for the purpose of taking up an offer of employment or for taking up new duties if they already work for that employer.
Allowable expenses include a whole range of costs necessitated by
moving, such as travel and subsistence, legal fees, removal fees,
carpets, curtains and domestic goods if the ones at the old address
cannot easily be moved. The maximum tax free amount payable is
£8,000. These costs must also be wholly incurred by the end of the
following tax year after the date on which the employee starts working
at the new location.
See our information sheet on Relocation Costs for further details.
