Employers are under increasing pressure to help their employees to alleviate the cost of living crisis currently facing the UK. Inflation-beating pay rises are not always possible, but there are some other tax efficient ways that the practice can help.
- Salary sacrifice
Salary sacrifice schemes can be a tax efficient way to help employees, by providing vital non-cash benefits in exchange for part of their pre-tax salary. Use of salary sacrifice arrangements for pension contributions, bicycles, cycling safety equipment, electric cars and some hybrid vehicles with low CO2 emissions can generate savings for both employees and you as an employer.
To be effective, salary sacrifice requires a contractual change to an employee’s salary, and as such professional advice should be sought.
- Vouchers
The trivial benefits exemption provides for a perfect tax-free opportunity for you to support your staff with a voucher up to the value of £50, which could be used for food shopping as an example. This could be particularly beneficial and well received in the run up to Christmas. As long as the voucher costs less than £50 per head , it is not cash, nor a reward for the work or performance, and it is not in the terms of the employee’s contract, then this gift can be made free of tax and NIC deductions. There are also no restrictions on the number of trivial benefit gifts that can be made in the year, unless the recipient is a director.
- Working from home allowance
Where employees are required to work from home, you could consider a contribution towards those additional expenses, such as heating costs, incurred by homeworkers. Payments of up to £6 per week for weekly paid workers, or £26 per month for monthly paid workers, can be made tax free.
Please note that if you do not pay allowances, home working employees can only claim tax relief where there is a contractual requirement to work from home as stipulated by you as the employer, and they are unable to work in the office. This is less likely to apply to practices as many of your team are required to be working on site, but there maybe circumstances where it could work, for example, for some support staff.
- Business mileage
If you do not reimburse your staff for business mileage, or reimburse at less than the approved rate, you could consider whether you want to change your policy to include a repayment of up to £0.45 per business mile for the first 10,000 miles, and £0.25 per mile thereafter.
Do not forget that payments for business mileage can also include an additional £0.05 per mile where a second employee is taken as passenger on the qualifying business journey.
Different approved mileage rates are available for those using bicycles, motorbikes and company vehicles.
Please note that business mileage does not include home to work commuting. Any mileage for attendance at the practice for out of hours work if it is an employees normal place of work and in their contract, is treated as private. If you have a number of branches and your team travel between branches this can be treated as business mileage unless it is in the employees contract that they could be asked to work at any site, in which case it is then also considered private mileage.
- Mobile phones
Where you reimburse an employee for business calls made on their personal mobile phone, you could consider providing them with a mobile phone instead. As long as the contract is in the name of the practice, the provision of a single mobile phone is tax free, irrespective of any private use of the phone.
- Provision of parking
If you do not have parking or sufficient parking at your practice for staff and clients, and if employees are having to pay to park, then you can provide a parking space, pay for, or reimburse parking without any tax charges arising for the employee.
- Provision of subscriptions
Not all practices will pay for professional subscriptions, but it could be a welcome relief to your team if you did. Moreover, as long as the subscription paid on behalf of an employee is on MRC’s list of approved professional bodies, then there are no tax implications. The list can be found here http://bit.ly/3lzVoVl.Â
Most of the main veterinary subscriptions will be on this approved list but it is worth double checking. You might want to consider whether you will limit the number of subscriptions that you will pay for each person; for example, you might pay for a team member’s RCVS subscription plus one other per year. Subscriptions are not just limited to the veterinary surgeons or nurses – they can apply to any support staff as well.
- Loans/advancement of wages
Lower paid employees may be more adversely affected during this time of economic crisis. You may wish to consider making loans to your staff to help them through, and this can include an advancement of wages.
Interest-free loans, or loans with a nominal rate of interest, of up to £10,000 per employee can be provided without incurring any benefit in kind charges for employees. If the loans exceed £10,000, then the whole amount would be subject to a benefit in kind charge. Where an employer has made a formal loan or advancement of pay to an employee, any payments or deductions made on account of the loan will not reduce pay for National Minimum Wage purposes.
- Health and wellbeing
Mental wellbeing is equally important as financial wellbeing. Poor mental health can significantly impact on an employee’s ability to work, or to work effectively. If you provide workplace mental health programmes to all staff on similar terms, including welfare counselling, this will be a tax-free benefit.
- Getting payroll right
Financial worries are one of the main causes of stress among adults in the UK. Not strictly tax saving, but as an employer you should clearly communicate any payroll changes on a timely basis, to alleviate any unnecessary stress caused by unexpected deductions or changes to income. Employees are not always aware of changes to their PAYE tax codes, or indeed the implications thereof, so where there are changes, do encourage your payroll processing team to communicate those, so your employees are forewarned and therefore forearmed to deal with any financial implications.
Always ensure that any changes to benefits packages are discussed with your employees, and that they are aware of any implication changes such as salary sacrifice may have on their entitlement to other benefits.
The tax efficient options noted above are correct as at 2022/23 tax year.
If you would like to discuss whether your business and your employees could benefit from any changes to the benefits packages on offer, please do not hesitate to get in touch with your usual Hazlewoods contact.
