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Non-taxable employee benefits and payments

by | Jun 26, 2018 | ACCA, business taxation, employer returns

An employer can provide some benefits to employees on which the employee is not taxable – from advice on pensions to work-related training.

Benefits on which the employee is not taxable are listed in chapter 5 of HMRC Booklet 480 ‘A tax guide – expenses and benefits’. This can be used as a checklist when reviewing benefits and P11D entries:

These include the following:

  1. Annual parties or similar functions which cost no more than £150 per head (see the May issue of In Practice for more details).
  2. Carers’ board and lodging.
  3. Costs of purchasing assets from employees.
  4. The benefit of the employer funding certain kinds of independent advice in relation to the employee shareholder agreements is not taxable in the hands of the employee.
  5. Employees with a disability are not taxable on the benefit of the private use of equipment or services provided by their employer to enable them to work for the employer (eg wheelchair or hearing aid).
  6. Fee paid by employer for an application for employee to join the Protection of Vulnerable Groups (Scotland) monitoring scheme.
  7. The provision of goodwill entertainment for an employee (or employee’s family or household) if no more than £250 and subject to various conditions.
  8. Health-screening and medical check-ups (up to one of each per year).
  9. The provision of job-related living accommodation in certain circumstances.
  10. Late night taxis provided by an employer to employee, subject to certain conditions.
  11. Subject to certain conditions, long service and suggestion scheme awards.
  12. Free or subsidised meals provided by employer to employee, subject to numerous conditions.
  13. The cost of necessary medical treatment abroad where an employee becomes ill or suffers injury while away from the UK in the performance of his/her duties (and insurance cost for such treatment).
  14. The provision of one mobile phone by an employer to an employee (not to member of family or household) unless any of these can be converted into money by the employee. Money an employer pays to an employee to use their own mobile is taxable.
  15. Accommodation, supplies or services used by the employee in performing his/her duties and any use of the benefit for private purposes by the employee is not significant.
  16. The provision of a car, motorcycle or bicycle parking space at or near the employee’s place of work.
  17. Where an employee works regularly at home, under agreed flexible working arrangements, an employer may pay up to £4 per week, £18 per month or £216 per year without supporting evidence of the cost. If more is paid then supportive evidence is required or HMRC’s agreement is required to pay higher amounts tax free.
  18. Expenses incurred in the provision of any pension, annuity, lump sum, gratuity or similar benefit to be given to the employee or to any member of the employee’s family or household on the employee’s retirement or death. The cost of providing such benefits may in some circumstances be taxable (under ITEPA 2003).
  19. The provision of pension advice to the employee up to £500. This should be available to all employees generally, or to those at a particular location (although it may be limited to those nearing retirement through age or ill health).
  20. Reimbursements made to employees by the employer for items purchased by the employee on behalf of the employer (eg an employee may buy stamps, stationery and equipment etc. for the employer and be reimbursed by the employer). Such amounts should not appear on form P11D.
  21. Subject to numerous conditions, the removal expenses borne or removal benefits provided by the employer may be exempt from tax and NICs. The exemption is due to employees who change residence as a result of starting a new job or as a result of a transfer within an employer’s organisation. The first £8,000 may qualify for the exemption.
  22. Subject to numerous conditions, costs incurred by the employer in retraining the employee intended to help that employee get another job.
  23. Sports facilities provided by the employer to employees and members of their families and households.
  24. Subject to conditions, benefits are exempt from tax and NICs if cost does not exceed £50.
  25. The benefit of welfare counselling made available to all employees generally on similar terms is exempt from tax (excluding some specific counselling).
  26. The provision of work-related training made for the employee by the employer.
  27. Subject to various conditions, the benefit of childcare provided or supported by the employer. Although from October 2018 employer-supported childcare is due to close for new applicants.
  28. The cost of transport which an employer provides to take an employee home, but limited to
  • travel after 9pm
  • employee usually travels in shared vehicle, which is unexpectedly not available
  • provision of a works bus
  • employer subsidises public transport
  • benefit of bicycles and/or cyclist’s safety
  • additional costs caused by strikes or other industrial action (such as hotel accommodation near place of work or additional travel costs)
  • assistance with the cost of travelling between home and work for disabled persons
  • travelling facilities provided between the mainland and offshore oil or gas rigs or platforms. May also include overnight accommodation and subsistence.

HMRC booklet 480 deals with the tax treatment of expenses and benefits.

Article from ACCA In Practice