1. Set up a tax-efficient share scheme for employees. Share schemes can create taxable benefits for employees, but if share options are granted under an approved share scheme or Enterprise Management Incentive scheme, there is no tax payable by the employees until the shares are sold. The annual CGT exemption (£10,100 in 2009/10) and the 18% rate of CGT make these potentially attractive benefits for many employees.
2. Pay employees £5 tax free each time they need to stay away from home overnight. This tax-free amount can be in addition to the cost of accommodation and meals that can be reimbursed if receipts are produced. If the overnight stay is abroad, the tax-free amount is £10 a night.
3. Reimburse the costs of a new employee’s moving expenses. You can reimburse up to £8,000 of a new employee’s moving costs tax-free if they have to move house to take up the job. If you pay more than this amount, the excess is taxed as part of the employee’s salary. This tax relief only applies if the new employee does not already live within a reasonable daily travelling distance of their new place of work.
4. Provide your employees with bicycles and associated safety equipment so they can cycle to work. As long as the bike and safety equipment remain the property of the employer, there is no tax charge for the employee, and the cost is fully tax deductible for your business. In addition, you can provide your cyclist employees (including those using their own bikes) with a tax-free breakfast when they arrive at work on any day that you designate a ‘cycle to work day’.
5. Encourage car sharing with tax-free payments to employees. When your employees travel to work-related training courses or make other business journeys using their own car, pay the drivers an extra tax-free 5p a mile for each fellow employee they carry.
6. Provide your employees with a free works bus, or subsidise an existing local public bus service. Paying for employees to get to work is normally a taxable benefit, but the provision of a works bus is tax-free if the vehicle is designed to carry at least nine passengers. The bus can also be used to take employees to the local shops at lunchtime with no additional tax charge.
7. Check how much you pay for the fuel used on business trips in your company cars. Employers can now pay up to 17p per mile tax-free (depending on the size of the car's engine and fuel type) to employees who pay for the fuel used in the company car they drive. If your company has any cars that are not very fuel-efficient, you can negotiate a higher tax-free mileage rate with the local tax office.
8. Don’t forget to party! Even the smallest business can host an annual tax-free social function for all its staff, including the directors and their partners. As long as the cost per head is less than £150, employees are not taxed for having a good time and the company benefits from full tax relief on the expense incurred.
9. Supply your employees with one tax-free mobile phone each. Mobile phones provided to employees are tax free, as long as it is the employer rather than the employee who owns the phone and takes out the contract with the telecoms company.
10. Pay employees who are parents partly with childcare vouchers that they can use to fund nursery and after school care. The first £55 a week paid as childcare vouchers is free of both tax and NICs in the hands of the employee and you do not have to pay employer’s NIC on the value of the vouchers. You have to offer the childcare vouchers to all your employees who work at the same site, and the vouchers must not be exchangeable for cash. However, be aware of the impact on the employees’ Child Tax Credits.
11. Reduce your expenses hassle by paying your employees a flat rate for meals they buy while working off-site, or when they work unusual hours. You can make a tax-free payment of £5 for one meal, £10 for two meals and £15 for an evening meal, subject to certain conditions. You must agree this arrangement with your tax office as part your dispensation for business expenses.Last Updated
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