Posted by Nick Day on 20 Jul 2020
Non-Cash Employee Benefits
Employers can give employees non-cash benefits as part of their remuneration. The value of non-cash benefits provided to an employee is normally taxable, but there are tax-free non-cash benefits available.
If an employer gives non-cash benefits to an employee, then the value of that benefit is normally taxed as employment income for the employee. Certain categories of benefit have specific valuation methods for calculating the taxable value, and there are non-cash benefits which can be provided to employees tax-free. There are numerous benefits regulations, and full guidance can be found here, but we have set out some of the more common taxable and tax-free benefits below.
If an employee is provided with accommodation either rent-free or for a rent which is below market rent, the difference between the rent the employee pays, if any, and the annual value (gross rateable value) of the property is taxable. If the property cost the company more than £75k then there is an additional benefit charge added. Accommodation required for the employment may be exempt.
The annual taxable benefit is determined using the list price of the car provided (not the actual cost), multiplied by a percentage depending on the emissions and fuel type of the car. This is time apportioned for the number of days in a tax year that the car is available to the employee.
Premiums paid by the employer are a taxable benefit.
Beneficial Loans over £10,000
The taxable benefit is the difference between the interest rate paid to the employer and the official rate of interest set by HMRC.
Assets for work use are tax-free, but if an asset is given or made available for the use of an employee privately are a taxable benefit. If given outright then the benefit is the market value of the asset, but if the asset is only made available to the employee then the annual benefit is 20% of the market value of the asset at the time it is first made available.
Tax-beneficial share schemes and employer pension contributions are dealt with separately here (link to other pages). Other main tax-free benefits which may be available for employees include:
- Cheap or free canteen meals, if these are provided for all employees, even if separate facilities are provided for different groups of employees.
- In-house sports facilities.
- Certain childcare arrangements.
- Bicycles and cycling safety equipment provided for employees to get to and from work.
- Workplace parking for cars, bicycles and motorcycles.
- Mileage allowances for work travel in the employee’s own vehicle (not commuting).
- Reasonable relocation expenses if the employee has to move to take up a new job or are transferred by their employer, up to a maximum of £8,000 for each move.
- A work mobile phone.
- Disabled employees can be provided with equipment and facilities for them to carry out their job.
- Christmas parties can also be tax-free if they cost £150 or less per head and are open to all employees.
- ‘Trivial’ benefits in kind – that is less than £50 in value, not exchangeable for cash, not a reward or bonus for doing well in their job, not part of their employment contract and not a ‘salary sacrifice’.
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- Liechtenstein Disclosure Facility Versus UK-Swiss Tax Agreement
- Enterprise Investment Schemes/Venture Capital Trusts
- Swiss Tax deal shows there is no substitute for good advice.
- Qualifying Non-UK Pension Schemes (QNUPS)