Tax Tip of The Week - Workplace schemes to save tax

The tip today concerns businesses that employ staff. Remember that includes yourself if you are employed by your company. We are looking at ways in which the business tax bill can be reduced by creating tax-efficient (and acceptable to the taxman) workplace schemes.

Such arrangements often take the form of a switch to benefits and salary sacrifice to save income tax and national insurance. Although the list is not exhaustive, we are very pretty sure that there is at least something that suits you as an employer or as an employee.

Making assets available for employee's private use
IT equipment: That’s certainly a very big opportunity. It basically means that you should buy your computer equipment through the company (instead of buying them privately) for there are considerable advantages doing so:

The business can buy IT equipment worth up to £2,500 and loan it to employees with absolutely no tax consequences for the latter. The business will get tax relief for the cost of the equipment over a number of years and also claim the VAT on the purchase. Let me say that the rules are quite complicated and if you don’t do it right, you will not achieve the above.

Other assets: When a business gives second-hand assets to be used privately by employees, although employees will be assessed on the perk, it is still advantageous as the tax on the benefit is much lower than normal income tax rates. Classic examples are computers, mobile phones, furnishings, DVD players etc. The company can also reclaim the cost of the assets and the VAT if the asset has been used for business before loaned to the employee (although it will have to pay back some of that VAT, based on some complex calculations). Once again, rules are quite complicated.

Travelling: where the employee works at different temporary sites, provided conditions are met (one of them is that the contract is not entirely based at a certain location), the employee’s traveling is tax-free if reimbursed by the employer. Construction and engineering employees often qualify for this one. We dare say that this is one of the rare situations in tax law where an employee is treated more favourably than a self-employed person. Evidence of expense is needed to persuade the taxman.

Subsistence: there is a limit up to which reimbursements to employees who are away from home on business and have to spend the night away from their home are tax-free. The limit is higher for overseas stay.

Parking: When the employer pays for the employees’ parking at the workplace, there are no tax consequences for the employees whilst the business gets tax relief for the expense.

Please contact me if you want further information on any of these tips