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What are the main tax free benefits available to SMEs?

06/02/2019

What are the main tax free benefits available to SMEs?

It can often feel like everything is taxable.  The current tax regime is very much against tax avoidance and so it is easy to think that there are no options to give tax-free benefits to your staff.  But this is not the case, there are many tax-free benefits and perks which can be legitimately provided.

Here is a range and explanation of what is currently on offer:

  • Staff Suggestion Scheme – you can make tax free cash awards to your staff under the employee suggestion scheme. The award is both tax and NIC free.  It can be made for any ideas to improve how the business is run.  There are two types of award.  If the idea does not result in a financial benefit to the employer, the maximum amount payable is £25.  If it results in a measurable financial benefit the employee can receive a tax-free payment of up to £5,000, depending on the benefit achieved.
  • Bicycles and cycle safety equipment – can be provided tax free via the cycle to work scheme. There are some conditions, broadly the equipment must be offered to employees generally, ownership must not transfer to the employee during the loan period, the equipment must be used mainly (>50%) for journeys to/from work or between workplaces.
  • Staff parties and annual functions – a staff party or annual function such as a Christmas party can be provided tax free to your employees provided that the total cost does not exceed £150 per head (this is a limit and not an allowance) and it must be open to all staff.
  • Mobile phone – one mobile phone per employee can be provided tax free. You can meet all of the costs of providing the phone, or you can provide a pay as you go handset, but the contract must be in the name of the employer.
  • Medical benefits and health checks – you can provide one annual health screening and one annual medical check, which extends to retiring employees. You can also pay up to £500 per year for recommended medical treatment, this is treatment recommended by an occupational health service to enable an employee to return to work after a period of absence due to ill health or injury.
  • Eye tests and glasses – eye tests and corrective glasses for VDU users or as otherwise required by the Health and Safety at work regulations. It is preferable to pay the optician directly or to provide employees with a voucher to exchange for the check-up.
  • Workplace charging facilities for electric vehicles – you can provide dedicated charging points at your premises and offer these to all employees generally or who are based at that location.
  • Trivial benefits – Any benefit can be provided to your staff providing that the average cost does not exceed £50, it is not cash or cash vouchers and is not given as a reward for services performed. This is an exemption not an allowance, so if the value of the benefit is £60 then the full amount is taxable. Directors, office holders and employees who are members of their family or household are subject to an annual cap of £300.
  • Interest free loans – You can loan an employee up to £10,000 per year without any tax charge arising. The loan can be used for any purpose but could for instance be used to subsidise travel season tickets.
  • Long service awards – Employees who have worked for you for at least 20 years can receive an award of up to £50 per year of service, provided that you have not given them a long service award in the last ten years.

Lesley Sutton is director and tax specialist at Revell Ward accountancy practice in Huddersfield.

Call: 01484 538 351

Website: revellward.co.uk

Twitter: @RevellWard