Tag: Tax Free

15 Brilliant Tax Free Benefits in Kind

Tax Free Bags Represent Duty Exempt Discounts

It’s P11D time, but have you considered giving your employees benefits in kind that are tax free, here are some to choose from:

  1. Pensions – Up to £40k can be paid in to you pension schemem by your employer (2014/15)  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

steve@bicknells.net

Do you get tax free parking?

Pool Cars

If you work in town or city  parking costs can be high.

So if your employer gives you a parking space its a big help.

There is a tax exemption (tax and NI) for parking facilities that are within a reasonable distance of where you work and its not restricted to on-site parking.

The parking space can also be used in the evenings and weekends and isn’t restricted to the nearest car park.

You can also use Salary Sacrifice.

See EIM 21685 for further details

So yes its tax free, so why is there any confusion?

Well a few years ago (2009), we had stories like….

Commuters who drive to work face a new ‘parking tax’ of up to £350 a year.

Ministers are backing a ‘workforce parking levy’ which will come into force in Nottingham in 2012 – and is likely to be adopted across the country.

The pilot scheme will see firms with more than ten parking places for staff charged £250 a year for each, rising to £350 in two years.

Employers would be free to pass on the charge to their staff – meaning it would effectively be a tax on driving to work.

This meant that there was some confusion, but its all clear now and free parking is an excellent tax free employee benefit.
steve@bicknells.net

Tax Free Childcare will the new rules be better or worse?

Mother and daughter with piggy bank

The Government wants to help working families and currently if you are an employee your employer can help with childcare and could for example buy childcare vouchers of up to £55 per week, the vouchers would be a tax free benefit to the employee. However, if you’re self employed you aren’t an employee so the rules don’t apply.

So recently there has been a consultation on what should be be done in the future.

The key proposals are:

  • New Scheme to go live in Autumn 2015
  • Working Families will open Voucher Accounts (self employed or employed)
  • As parents pay in the government tops up the account with 20p for every 80p paid in
  • Top up capped at £1,200
  • To be eligible all parent must work and not receive tax credits or be an additional rate tax payer

The chart below shows how it should work:

Childcare 2

 

steve@bicknells.net

 

 

 

 

 

 

How to carry forward unused pension allowances

Taking money

If your total pension savings for the tax year are more than the annual allowance you can carry forward any unused allowance from the previous three years to the current tax year. You only have to pay tax on any amount of pension savings in excess of the total of:

  • the annual allowance for the tax year
  • any unused annual allowance you carry forward from the previous three years 

You can only carry forward unused annual allowance if during the tax year you were in either:

  • a registered pension scheme
  • an overseas pension scheme and either you or your employer qualified for UK tax relief on pension savings in that scheme

There’s a strict order in which you use up your annual allowance. First you use the annual allowance from the current tax year followed by any unused annual allowance from the previous three tax years, using the earliest tax year first.

There are special rules when carrying forward annual allowance for tax years 2008-09 to 2010-11. You should calculate the amount of available annual allowance using an annual allowance rate of £50,000 and using the current method of valuing your pension savings amount- more in the link below.

Example

Sam made total pension savings of £80,000 in 2012-13. Sam has been a member of a pension scheme since June 2010. His pension savings for the previous three years are as follows:

2009-10: £0 – he wasn’t a member of a pension scheme

2010-11: £30,000

2011-12: £0 – although he was a member of a pension scheme

Sam can carry forward £70,000 unused annual allowance to 2012-13 calculated as:

2009-10: £0 – because he wasn’t a member of a pension scheme

2010-11: £20,000

2011-12: £50,000

Even though Sam didn’t make any pension savings in 2011-12 he did belong to a pension scheme so he can carry forward all of his unused annual allowance.

The annual allowance for 2012-13 (£50,000) plus the carried forward annual allowance (£70,000) is £120,000.

Sam doesn’t have any tax to pay on his pension savings of £80,000 for 2012-13 as it’s less than the total annual allowance available of £120,000. He also has £40,000 unused annual allowance (from 2011-12) to carry forward to 2013-14.

Tax Year

Annual Allowance

2006/07

£215,000

2007/08

£225,000

2008/09

£235,000

2009/10

£245,000

2010/11

£255,000

2011/12

£50,000

2012/13

£50,000

2013/14

£50,000

2014/15

£40,000

 steve@bicknells.net

Save Tax with a Relevant Life Plan

Life Insurance

No one enjoys paying out on insurance premiums but why not take advantage of a great “tax break” when it comes to providing life assurance for your family?

It’s called a Relevant Life Plan and it works as follows;

Most directors pay for family life assurance out of their “taxed” net income and therefore for example a £100 per month premium has really cost approximately £145 when you add back in the tax and N.I.

If you were to pay for this via a Relevant life Plan then your company can make the payments for you and its classed as a business expense therefore saving on Corporation Tax. In this instance the £100 per month would now have a real cost of £80 per month. More good news is that it’s NOT a P11d benefit and the policy is written into a special trust which means on death the proceed go straight into the trust (for the benefit of your family) and not back to the company.

I found details of this policy at www.direct-fs.co.uk

steve@bicknells.net

Are your workers ‘Fit for Work’? or would use of a tax free fitness option help?

Fit for Work

Now Christmas is over and we may have eaten more than we should, many of us will be thinking of getting back into shape.

Did you know the NHS daily recommendation for steps per day is 10,000 steps and a recent article in Workplace Savings and Benefits pointed out that according to an American study:

  • Secretaries take 4,300 steps per day
  • Lawyers take 5,000 steps per day
  • Construction and Factory 9,000 steps per day

Sickness absence in the UK costs £17bn per year.

You could reduce sickness by promoting an active lifestyle and it could be tax efficient too!

http://stevejbicknell.com/2011/11/07/tax-free-fitness/

steve@bicknells.net

Will the Christmas Party be tax free?

the unlike trio 01/Devil, Angel and Santa celebrating Xmas

The answer is probably! maybe?

HMRC have an Exemption (not an allowance) of £150.

If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate. Where there is more than one annual function potentially within the exemption, we do not expect employers to keep a cumulative record, employee by employee, of functions attended. But for each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, the others taxable (see examples at EIM21691).

The figure of £150 is not an allowance. For functions that are outside the scope of the exemption (see example at EIM21691) directors and employees, except those in an excluded employment, are chargeable on the full cost per head, not just the excess over £150, in respect of:

  • themselves and
  • any members of their family and household who attend as guests.

The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.

http://www.hmrc.gov.uk/manuals/eimanual/eim21690.htm

Things to watch out for:

1. The function must be open to all staff, if its just directors, its taxable

2. The cost must not exceed £150 per head, otherwise it will all be taxable http://www.companychristmas.co.uk/news/tax_free_christmas_parties

3. If you have several events during the year you may have to choose which ones qualify if the total exceeds £150

steve@bicknells.net

Would you invest in a Forest?

Did you know that there are considerable tax advantages

  • The income and profits from timber sales in woodlands managed commercially are free from both Income and Corporation Tax.
  • The gain in value of standing timber, whether from the physical growth of the trees or rises in timber prices, is entirely free from tax.
  • The entire value of commercial woodland, including both the land and the trees, attracts Business Property Relief, currently at 100%, once it has been owned for two years. Provided this condition is met, there is no Inheritance Tax liability.

http://www.upm-tilhill.com/file-bank/Taxation%20Leaflet%2011%20V2.pdf

Its ethical and sustainable. It even has good returns for example http://www.forestryinvestments.co.uk/ claim that they are suitable for SIPPs and claim to have a 22% IRR return.

In a Moneywise article they say returns have been around 19% but in the long term 5% is more realistic

http://www.moneywise.co.uk/investing/investment-guides/the-pros-and-cons-forestry-investing

steve@bicknells.net

The tax advantages of cycling to work

It might be cold now, but spring is just around the corner and cycling could be just the thing help you keep fit, save money and be kind to the environment.

HMRC like cyclists too, so what do you need to do to qualify for tax savings.

First you will need to get your employer to participate in the scheme, they can do this either by setting up their own scheme or by using www.cyclescheme.co.uk or http://www.bike2workscheme.co.uk/  there are lots of other similar sites too.

The basic rules are:

You must use the bike and/or safety equipment mainly (more than 50 per cent of the time) for ‘qualifying’ journeys. This means a journey or part of a journey:

  • between your home and workplace
  • between one workplace and another
  • to and from the train station to get to work

Taking part in the scheme means that you don’t have to pay a lump sum up front to buy a bike and/or safety equipment. Instead, you could loan the bike and/or equipment from your employer, usually up to the value of £1000.

Making loan repayments

Your employer may want to recover all or part of the cost of loaning you the bike and/or safety equipment. If so, you would then make loan payments back to your employer over an agreed period (typically 12 to 18 months) to spread the cost.

The loan payments are usually taken out of your salary through a ‘salary sacrifice’ arrangement. This means you agree to accept a lower amount of salary in return for a benefit – the loan of a cycle and/or safety equipment.

http://www.direct.gov.uk/en/TravelAndTransport/Cycling/DG_190101

Example of savings using Salary Sacrifice

Cost of bicycle:                                                                   £500

Cost of accessories                                                           £100

Total cost                                                                             £600

Income Tax 20%                                                               £120

Employee National Insurance     12%                       £72

Total Employee Saving                                                   £192

Your employer will save Employers National Insurance of 13.8%   on the salary sacrificed

The Employee can buy the Cycle from the company for a price set using the HMRC valuation table below

Age of cycle Acceptable disposal value percentage
  Original price of the cycle less than £500 Original price £500+
1 year 18% 25%
18 months 16% 21%
2 years 13% 17%
3 years 8% 12%
4 years 3% 7%
5 years Negligible 2%
6 years & over Negligible Negligible

 

In addition you can claim an HMRC mileage allowance for Cycling of 20p per mile and if you employer doesn’t pay the allowance you can claim back the tax on the allowance using form P87 http://www.hmrc.gov.uk/forms/p87.pdf

If you have ‘Cycle to Work’ days your employer can provide free meals and refreshments for cyclists. http://www.hmrc.gov.uk/manuals/eimanual/eim21668.htm

So as the saying goes ‘get on your bike’

steve@bicknells.net

 

Have a party! £150 per head is tax free

Its will soon be Christmas and its definitely party season, did you know that you can spend £150 per head per year on parties and functions and its not a taxable benefit to the employee and you can reclaim the VAT on entertaining employees.

You can have multiple events, the exact rules are

http://www.hmrc.gov.uk/manuals/eimanual/eim21690.htm

So what are you waiting for? book up now or if you’re a small business you could even hold the party at your home

steve@bicknells.net