Tag: Tax Free

What benefits are allowed to be given tax free?

Trivial Benefits

You don’t have to pay tax on a benefit for your employee if all of the following apply:

1. it cost you £50 or less to provide
2. it isn’t cash or a cash voucher
3. it isn’t a reward for their work or performance
4. it isn’t in the terms of their contract

This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.

You have to pay tax on any benefits that don’t meet all these criteria.

Directors of ‘close’ companies

You can’t receive trivial benefits worth more than £300 in a tax year if you’re the director of a ‘close’ company.
A close company is a limited company that’s run by 5 or fewer shareholders.

Problem areas and points to note

  1. There is no limit on how many trivial benefits you give to employees
  2. Store Gift Cards that can’t be exchanged for cash are acceptable
  3. Birthdays, anniversaries, Christmas, New Year, and basically any special occasion not work related are great for trivial benefits
  4. Avoid it be part of a continuation of the same benefit as described below

Employer D gives an employee a gift card, which costs the employer £10 to provide. The employer tops up the employee’s gift card on 7 further occasions, at a cost of £10 for each occasion. Although the benefit to the employee is topped up on separate occasions there is a single benefit of the provision of a gift card. The total cost to the employer for providing the benefit over the period of employment is £80 and therefore this benefit is not exempt as a trivial benefit. https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim21865

Annual Parties and Functions

Annual parties at Christmas or alternative functions of a similar nature, such as an annual dinner dance, which are open to staff generally and which cost no more than £150 per head to provide. Where there’s more than one annual function and their total cost per head exceeds £150, only the functions that total £150 or less will not be taxed. Please note that the figure of £150 quoted is not an annual allowance and the criteria set out at Section 264 ITEPA 2003 must be satisfied to meet the exemption. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785476/480_2019_Expenses_benefits.pdf.pdf

Gifts from Third Parties

Certain gifts received by an employee if all the following conditions are satisfied, the:

• gift consists of goods or a voucher or token only capable of being used to obtain goods

• person making the gift is not the employer or a person connected with the employer

• gift is not made either in recognition of the performance of particular services in the course of the employment or in anticipation of particular services which are to be performed

• gift has not been directly or indirectly procured by the employer or by a person connected with the employer

• gift cost the donor £250 or less

• total cost of all gifts made by the same donor to the employee, or to members of the employee’s family or household, during the Income Tax year is £250 or less

Click to access 480_2019_Expenses_benefits.pdf.pdf

 

steve@bicknells.net

 

Are you making the most of your tax free allowances?

Each year we a get tax free allowances:

NI Free £8,164

Tax Free Salary £11,500

Capital Gains Tax Allowance £11,300

Rent a Room £7,500

Dividend Allowance £5,000

Personal Savings Allowance £1,000

Then there are  many other tax saving opportunities like tax free childcare https://stevejbicknell.com/2016/08/19/childcare-3-part-report-for-childcare-providers-and-parents/

Plus tax free benefits https://stevejbicknell.com/2016/09/21/are-you-making-the-most-of-tax-free-benefits/

Have you tried to use these allowances?

What if you set out each year to take advantage of these tax free opportunities?

You would need your own business to be able to restrict your earnings to £8,164 or £11,500 as National Minimum Wage would mean you will get pay levels above these £7.50 x 37.5 hours x 52 weeks = £14,625, however, directors can pay themselves below NMW.

To use the Capital Gains Allowance you are going to need to have assets to sell and make a gain

Rent a Room is achievable especially if you take in students

Dividend Allowance is great if you have your own company

Everyone should be able to use the PSA

Why not sit down and work out how you could maximise the use of the tax free allowances that are available

steve@bicknells.net

 

 

 

 

 

It’s time for a Tax and NI free Trivial Benefit

hand holding christmas voucher isolated over white

Christmas is definitely a time when you can give your employees and yourself a trivial benefit worth up to £50.

Section 323A ITEPA 2003 sets out a statutory exemption for trivial benefits. Under this exemption, if an employer provides a benefit to its employees, the benefit is exempt from tax as employment income if all the following conditions are satisfied:

  • the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person) (see EIM21865)
  • the benefit is not cash or a cash voucher (see EIM21866)
  • the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements) (see EIM21867)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services) (see EIM21868)

Where the employer is a close company and the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year (see EIM21869).

Here is an example

The Employer provides each of its employees with a bottle of wine costing £25 at Christmas. However, as an alternative, it provides employees who do not drink alcohol with a £25 gift voucher for a national supermarket chain which they can exchange for an alternative non-alcoholic Christmas gift. Both the bottle of wine and the non-cash gift voucher can be covered by the exemption.

In fact all shop vouchers that can’t be cash in will count provided the value is less than £50.

So why not make a list of special occasions:

Birthday

Christmas

New Year

Anniversary

Holiday

Easter

Buy a stock of vouchers and give them out.

This is a fantastic tax free benefit.

steve@bicknells.net

Are you making the most of tax free benefits?

I want you

Have you considered giving your employees or yourself benefits in kind that are tax free, here are some to choose from:

  1. Pensions – Up to £40k can be paid in to your pension scheme by your employer (2015/16)  and you can use carry forward to pay in even more
  2. Childcare – Up to £55 per week but check the rules to makesure your childcare complies (HMRC Leaflet IR115)
  3. Mobile Phone – One per employee
  4. Lunch – Tax Free Lunch Blog
  5. Cycle Schemes – Cycle to Work Blog
  6. Fitness – Fitness Blog
  7. Parties and Gifts – Christmas Blog
  8. Parking – Parking Blog
  9. Business Mileage Allowance – 45p for the first 10,000 miles then 25p
  10. Long Service Award – A bit restrictive as you need 20 years service, the tax free amount is £50 x the number of years
  11. Eye Tests and Spectacles – The Eye Test must be needed under the Health & Safety at Work Act
  12. Suggestion Schemes – Suggestion Scheme Blog
  13. Insurance such and Death in Service and Income Protection – Medical Insurance Blog
  14. Travel Expenses – Travel Blog
  15. Working From Home – Working from Home Blog
  16. Clothing – Tax Allowances
  17. Trivial Benefits – Trivial Blog
  18. Training – Training and Salary Sacrifice CPD
  19. Relocation Costs
  20. IPad or Laptop – IPad used for Business
  21. Rent a Room to another employee – Rent a room blog

steve@bicknells.net

Can my Staff have tax free living accommodation?

Emergency Mobile Application

In general providing living accommodation to employees is treated as a taxable benefit in kind with the benefit value based on the cash equivalent.
accommodation value
The main occupations which satisfy the rules for exemption are:
• agricultural workers living on farms or agricultural estates
• lock-gate and level crossing gatekeepers
•caretakers who live on the premises for which they are responsible where
they are on call outside normal working hours
•stewards and greenkeepers who live on the premises they look after
•managers of public houses who live on the premises
•wardens of sheltered housing who live on the premises where they are on
call outside normal working hours
•police officers and Ministry of Defence police
•prison governors, officers and chaplains
•clergymen and ministers of religion, unless engaged on administrative
duties only
•members of HM Forces
•members of the Diplomatic Service
•managers of newspaper shops that have paper rounds
•managers of traditional off-licences, that is, those with opening hours
equivalent to a public house
•in boarding schools where staff are provided with accommodation on
or near the school premises – the head teacher, other teachers with pastoral
or other irregular contractual responsibilities outside normal school hours
(for example, housemaster), bursar, matron, nurse and doctor
•veterinary surgeons who live close to the practice in order to respond
regularly to emergency calls
•managers of camping and caravan sites living on, or near to, the premises
•stable staff of racehorse trainers, who live on the premises and certain key
workers who live close to the stables.

The Test

Basically the test is based on ‘necessary’ and ‘customary’ https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim11300

The test is only satisfied where the employee can demonstrate that occupation of the particular property (as opposed to any other property) is essential to the proper performance of the duties of the employment.

Support for this view can be derived from Langley and Others v Appleby (53TC1), in which Fox J said at page 21
“if it is asserted that it is essential for the servant to occupy the house in order to perform his duties, it seems to me that the servant must establish affirmatively that for the performance of his duties he must live in that house and no other.”
The words “that house and no other” emphasise the strict nature of the test.

An employee may claim that it is necessary to occupy a particular residence because the employer requires the employee to live there. This is not enough to satisfy the test. It must be shown that the duties of the employment require occupation of the residence. An argument that the employee cannot afford to live elsewhere is not sufficient, see Vertigan v Brady (60TC624).

Rent Allowances and Deductions

It is common for an employee to:

  • own the property he lives in, or
  • rent the property from a third party, not his employer.

In both cases the employer may pay the employee extra salary or a rent allowance to help with the accommodation costs. This extra salary or rent allowance will count as earnings under Section 62 ITEPA 2003

An employer may own or rent accommodation and provide it to an employee. If the employee is entitled to a fixed wage or salary from which sums are deducted by the employer in respect of the accommodation then the fixed wage or salary is earnings under Section 62 ITEPA 2003. No deduction is allowed from earnings for the deductions made by the employer. See Cordy v Gordon (9TC304) and Machon v McLoughlin (11TC83)

 

steve@bicknells.net

Rent a Room and earn £7,500 tax free

Fotolia_45741373_XS cash

The Rent a Room Scheme lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.

You can let out a room or an entire floor.

How it works

The tax exemption is automatic if you earn less than the threshold. This means you don’t need to do anything.

You must complete a tax return if you earn more than the threshold. From 6 April 2016, this is £7,500. For the 2015 to 2016 tax year, the threshold was £4,250.

When you can use the Rent a Room Scheme

You can use the scheme if:

  • you let a furnished room to a lodger
  • your letting activity amounts to a trade, for example, if you run a guest house or bed and breakfast business, or provide services, such as meals and cleaning

When you can’t use the Rent a Room Scheme

You can’t use the scheme if the accommodation is:

  • not part of your main home when you let it
  • not furnished
  • used as an office or for any business – you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities
  • in your UK home and is let while you live abroad
  • the whole of your home, rather than a part of it

SpareRoom

SpareRoom, the UK’s busiest flatshare site. Every three minutes, someone finds a flatmate with SpareRoom.

The table below shows the change in monthly rents between 2009 and 2014 according to Spareroom:

Ave Rent 2009 (£) Ave Rent 2014 (£) Rental Increase %
London & suburbs £549 £691 25.8%
East Anglia £345 £398 15.4%
East Midlands £314 £353 12.6%
North England £304 £334 9.8%
North West England £316 £359 13.8%
South East England £390 £449 15.2%
South West England £347 £394 13.7%
West Midlands £334 £366 9.7%
Yorkshire & Humberside £312 £347 11.3%
Northern Ireland £238 £260 9.5%
Scotland £325 £403 24.2%
Wales £302 £332 9.9%
UK £500 £550 10%

2016/17 rules on the tax free allowance for Sandwiches

Beautiful businesswoman on her lunch

2015 No. 1948 INCOME TAX The Income Tax (Approved Expenses) Regulations 2015 come into force on 21st December 2015.

Screenshot 2015-12-08 13.00.53

What are business journeys (HMRC definition)

You can only get tax relief on the cost of business journeys. These are when, as part of your job:

  • you have to travel from one workplace to another – this includes travelling between your main ‘permanent workplace’ and a temporary workplace
  • you’ve got to travel to or from a certain workplace because your job requires you to

But business journeys don’t include:

  • ordinary commuting – when you travel between your home (or anywhere that is not a workplace) and a place which counts as a permanent workplace
  • private journeys – which have nothing to do with your job

 

http://freeagent-assets.s3.amazonaws.com/website/images/site-assets/landing/lunch.600.png

steve@bicknells.net

Contact Us

Tax Free Childcare from 2017

https://assets.digital.cabinet-office.gov.uk/government/uploads/system/uploads/image_data/file/23715/s300_TFC_screenshot_960x640.jpg

 

Tax-Free Childcare will be available to around 2 million households to help with the cost of childcare, enabling more parents to go out to work, if they want to, to provide greater security for their families.

In summary:

  • The new scheme will start in early 2017
  • You will open an online GOV.UK. Tax-Free Childcare account
  • For every 80p paid in there will be a top up of 20p. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children). You or anyone can pay in whenever and whatever amounts you choose.
  • Its available for children under the age of 12 or 17 if disabled
  • Parents must be working and earning between £100/week and £100,000/year, there will be a 3 month checking process.
  • Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements. Its not dependent on your employer offering a scheme. Its also available to self employed parents and those of paid sick leave, SMP, SPP and Adoption leave.
  • You will also have the option to continue with an employer supported scheme
  • If you need to you can withdraw the 80p part paid in

You find more details at Gov.UK

steve@bicknells.net

Contact Us

Is it time to get a lodger?

Woman working on laptop while man vacuums

Renting out a Room is a great way to earn some tax free cash and in the Summer Budget an increase in the tax free allowance was announced…

The government will increase the Rent-a-Room relief from £4,250 to £7,500 a year from April 2016. The value of this relief has been frozen since 1997, so this increase will allow individuals who rent a room in their main residence to do so tax free on income up to £7,500 to reflect increases in rent.

You can use the scheme if:

  • you let a furnished room to a lodger
  • your letting activity amounts to a trade, for example, if you run a guest house or bed and breakfast business, or provide services, such as meals and cleaning

You can’t use the scheme if the accommodation is:

  • not part of your main home when you let it
  • not furnished
  • used as an office or for any business – you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities
  • in your UK home and is let while you live abroad
  • the whole of your home, rather than a part of it

You can get further details in HS223

Finding a lodger shouldn’t be too difficult and websites like Spare Room can help.

steve@bicknells.net

No more tax this year! Tax Freedom Day was 28th May

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May 28th 2014 was the day when average earners had paid their tax for the year and started working for themselves.

It is calculated by comparing general government tax revenue with Net National Income (NNI). The total of all government tax revenue – direct and indirect taxes, local taxes and National Insurance contributions – is calculated as a percentage of NNI at market prices. This year it comes to 41.09%. That percentage is then converted to days of the year, starting from 1 January. The first day of the year that Britons work for themselves rather than the taxman is Tax Freedom Day. (Adam Smith Institute)

This year it was 3 days earlier than in 2013, hooray, lets hope it comes even earlier next year.

So in 2014, for 148 days of the year every penny earned by Britons was taken by the government in tax.

steve@bicknells.net