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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.
Let’s look at the options….
Exemption for Canteen Meals
Employees can be provided with free or subsidised meals provided generally to employees served on the business premises where the following 3 conditions are met:
- The meals are provided on a reasonable scale
- That all employees or all those at a specific location may obtain free or subsidised meals
- If the meals are provided in a restaurant or hotel at a time when meals are being served to guests/clients part of the dining area is designated for employees
Not everyone needs to use the facility they just need the option to use it and its is possible for senior management to have superior meals.
This exemption is not available where only select employees are able to get a free lunch.
HMRC are happy to accept Tea and Coffee as trivial benefits that can be ignored.
Since April 2009 employers have been able to pay their employees HMRC approved flat rate allowances referred to as Benchmark Subsistance, the rates are:
- £5 if you buy a breakfast and start your business journey before 6am
- £5 if you’re out of the office on business for more than 5 hours, and buy one meal
- £10 if you’re out of the office on business for more than 10 hours, and buy 2 meals
- £15 if your business trip keeps you beyond 8pm, and you buy an evening meal
So £15 is the maximum
You can only claim if:
- travel is required as part of your dutues or you are working at a temporary work place
- you are away from your work place or home for more than 5 hours
- you are expected to pay for food and drink after starting your journey
Vouchers can be issued tax free but only up to the value of 15p per working day and the voucher must be non-transferable and used for meal only.
I have separate blog on this topic http://stevejbicknell.com/2013/02/13/what-travel-expenses-will-the-taxman-allow/
In 2012 Unbiased.co.uk reported that £12.6 billion was unclaimed by UK tax payers, here is a list with some ideas:
- Income Related Tax Credits – Check and find out what you are entitled to – UK Benefits https://www.gov.uk/benefits-adviser
- Tax Relief on Pension Contributions – There are estimated to be over 4 million people not paying into a pension, auto enrolment should help to change that, this blogs explains the tax advantages http://stevejbicknell.com/2012/05/02/why-invest-in-a-pension-because-of-tax-relief/
- Tax Relief on Charity Donations – Are you using Gift Aid? are you a higher rate tax payer entitled to additional relief?
- Saving on Inheritance Tax – Many people don’t have a Will let alone any IHT planning!
- Making Use of ISA’s – Why get taxed on the interest on your savings if you could have an ISA? Its easy to get an ISA and you can still have access to your ISA savings if you need it, the current ISA allowance is £11,520 or £5,760 for cash ISA’s
- Child Benefit – Use the benefits adviser to check if you can claim – UK Benefits https://www.gov.uk/benefits-adviser
- Avoiding tax penalties and late filing – This just requires you to be organised, make sure you know the filing dates http://www.hmrc.gov.uk/sa/deadlines-penalties.htm and get the information needed in plenty of time
- Savings on Capital Gains – The current allowance for 2013/14 is £10,900 (previously £10,600) for an individual many people seem to forget they have this allowance
- Making Use of Employee Share Schemes – The government love employees to have shares and this year introduced a new share ownership option http://stevejbicknell.com/2013/08/03/employee-shareholders-will-your-employees-want-shares/
- Income Tax and Personal Allowances – Consider who should own assets (and get income from those investments) – you or your spouse – so that you can minimise your tax liability
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
Salary Sacrifice is a very tax efficient way to give your employees benefits and the most popular benefits are Pensions and Childcare. I wrote a blog back in 2011 which explained how it can save 45.8% in tax and NI
HMRC decided on 9th April 2013 that it was time to “clarify” in their Manuals what are successful and unsuccessful salary sacrifice schemes and have added some further guidance. Their Staff are instructed not to approve schemes (Employment Income Manual EIM42772)….
You (HMRC) may get requests for advice:
- on how to set up a salary sacrifice arrangement, or
- on whether draft documentation will achieve a successful salary sacrifice.
You (HMRC) should not comment on either of these areas. Salary sacrifice is a matter of employment law, not tax law. The nature of an employee’s contract of employment is a matter for the employer and employee.
The specific updates are:
EIM42750 – Salary Sacrifice – updated – this contains the examples of schemes
EIM42777 – Contractual arrangements – this has interesting comments on childcare and pensions
- If the scheme involves childcare or childcare vouchers then the conditions for exemption must be met. (See EIM21905 and EIM16057). Is the agreement to provide childcare between the employee and the childminder or nursery. If so the employer by paying the cost directly is meeting the employee’s personal liability. (See EIM00580).
- For a registered pension scheme the amount which can be contributed to the scheme is normally linked to the employee’s chargeable earnings. In consequence if the salary sacrifice results in some of the employee’s income no longer being taxable, then the amount of contribution, which can be made to the scheme, will also drop.
EIM42778 – Exemption from Tax/NIC – basically stating that exemption may require that the sacrifice may be available to all employees but that the sacrifice must not reduce the employees wages below National Minimum Wages
The following is an example of an unsuccessful Childcare Salary Sacrifice:
The pay slip for the month ended 31 July 2006 gives monthly pay as £2000 plus overtime of £100, deductions for tax of £355 and NIC. The pay slip for the following month shows monthly pay of £2000 plus overtime of £100, deductions for NIC, childcare vouchers of £200 and tax of £310. The code number operated on the salary has not changed.
The situation is not clear from the payslip. When asked, the employer explains that for August, because childcare vouchers of £55 a week are exempt, £220 of vouchers has been deducted from the gross pay of £2100 and tax charged on the net figure of £1880. Further information is needed, for example a copy of the employment contract and any variations agreed by the employer and employee to that contract.
It is established that in July the employee bought childcare vouchers. The employer was not involved. The employer accepts that as the childcare in July was not provided by him, no tax exemption is available. In August the employee asked the employer to buy the childcare vouchers to take advantage of the exemption. The employer did this and deducted the cost from the monthly salary. The contract of employment shows that the employee is entitled to a base salary of £24000 to be paid monthly. This contract has not been varied. As the employee’s entitlement has remained the same, this is not a successful sacrifice. (See EIM42766).
If you operate salary sacrifice schemes its worth checking that your schemes comply, the tax consequences of failure to comply could be substantial.
This year we had some good news for next year, the exemption threshold for employment-related loans has been increased for 2014/15 from £5,000 to £10,000, as long as the balance is below this level there is no tax charge for employees or employers.
But there could be bad news for participators (Directors/Shareholders) who have been using one of these techniques to avoid the 25% temporary Corporation Tax charge:
1. Using a Partnership or LLP where the company is a partner or member as a way to get loans
2. Making arrangements that did not qualify as loans but the where value ended up in the hands on a participator
3. Making loans repaying them within 9 months and getting a new loan, the Bed and Breakfast approach
4. Transfers of assets
5. Loans channelled through third parties
New anti avoidance rules are coming, there is a consultation paper aimed at minimising the scope for abuse and there will be new legislation in the Finance Bill 2014 and Finance Bill 2015.