Chapter 20 – Miscellaneous benefits and other points

Question 1

vans, mobile phones and vouchers

Answer 1

Vans – a van with unrestricted private use has a flat rate benefit value of £3,430. That applies to all vans apart from zero emission van which is valued at £2,058. The charges are apportioned if the van was not available for the whole year and if the employee’s private use was insignificant there is no taxable benefit. A taxable benefit only occurs when there is unrestricted private use, when the restricted private use condition is met, there is no taxable benefit. This is met when the van is provided to the employee, but the employer prevents private use other than commuting to work and business travel. There is also an annual charge of £655 where free or subsidised fuel is provided by the employer. There is no reduction where an employee contributes towards private fuel for the van.
Mobile phones – this is exempt from tax even when the employer pays for employees personal phone calls. The exemption only covers the provision of one mobile phone for an employee and there is no exemption for phones made available to members of the employee’s family or household.
Vouchers – if an employer provides vouchers this is a taxable benefit, the benefit is the cost of the vouchers to the employer.

Question 2

mileage allowances

Answer 2

Mileage allowances – this is paid when an employee uses his own car to work purposes, the mileage allowance rules do not apply to employer owned vehicles. HMRC have set tax exempt limits and if allowances are paid above the limits the employee has a benefit. Business mileage does not include travelling from home to work, if this is reimbursed the full amount on that is taxable. The limits are:
Vehicles First 10,000 business miles Additional business miles
Cars/vans 45p 25p
Motorcycles 24p 24p
Bicycles 20p 20p

If the employee receives more than the limits, they are deemed to have made a profit, and the profits are taxable. If the employee has received less than this, they are deemed to have made a loss, which is deductible.

Question 3

childcare, tax free childcare schemes and tax exempt benefits

Answer 3

Childcare – the provision by an employer of a nursery for employee’s children is a tax-exempt benefit. There is also a limited exemption where the employer supports childcare by way of childcare vouchers. However, as a result of the government’s tax-free childcare scheme the employer schemes are closed to new entrants from 4 October 2018. For the 19/20 tax year the tax exemption is £55 per week for basic rate taxpayers, £28 per week for higher rate taxpayers and £25 per week for additional rate taxpayers. The rate of tax paid only considers an employee’s earnings from employment.
Tax free childcare scheme – this government scheme meant parents set up an online account which is used to pay for approved childcare. Contributions to an account are topped up by 25% of the contribution, up to a maximum of £2,000 per annum per child (£4,000 for a disabled child). If funds are withdrawn from the account, the withdrawn funds are not eligible for the top up payment. Top up payments are only made in respect of a child up to 1st September following their 11th birthday (16th if disabled). The person opening the account must be in paid work of at least 16 hours a week at the national living wage, if adjusted net income exceeds £100,000 per annum, that person is not eligible for the scheme.
Tax exempt benefits – employer’s contribution to the employee’s pension scheme is exempt as long as it is a registered scheme. The reimbursement of removal expenses is exempt up to a maximum of £8,000. Such expenses will qualify if they are reasonably provided in connection with a change in the employee’s residence, the expenses include legal fees in connection with the acquisition, abortive acquisition costs, legal fees with disposal of former residence, costs of transporting belongings and travel and subsistence for the employee and family to visit the new area. The expenses also include additional interest paid on a loan between buying a new property and disposing of an old one.
The provision of workplace parking is exempt, including the costs of a season ticket at a public car park close to work. Subsidised staff canteens are tax exempt benefits, as long as the facilities are available to all employees. Incidental expenses paid by an employer to employees working away from home are tax exempt up to £5 per night in the UK and £10 per night abroad. The provision of work-related training is exempt. The costs of a Christmas party are not a benefit as long as the costs of the party does not exceed £150 per head. If the costs are over that the full cost per head is taxable. Awards by an employer to an employee from a staff suggestion scheme are exempt as long as the award does not exceed £5,000. Long service awards up to £50 per year of service for at least 20 years of service with the same employer are exempt.
The first £500 of advice in a tax year in relation to employee’s pension arrangements are tax exempt as long as this is available to all employees or all employees who are within 5 years of retirement age or retiring due to ill-health.

Question 4

exemption of trivial benefits, optional remuneration arrangements and PAYE settlements

Answer 4

Exemption of trivial benefits – this is a benefit that does not exceed £50, if it exceeds £50 then the full amount will be taxable. Cash or vouchers are not trivial, and the benefit cannot be provided as part of contractual obligations, the benefit is provided for a non-work reason.
Optional remuneration arrangements – this applies to two types of arrangements, type A and B. type A means the employee can give up the right to receive earnings for example a salary in return for a benefit, a salary sacrifice are within the rules. Type B is when an employee chooses to receive a benefit rather than an amount of salary, the amount taxed is the higher of the cash amount that the employee would have received, or the taxable benefit amount determined under the benefit rules. The higher amount is also subject to class 1A NICs. Where salary is exchanged for an exempt benefit (mobile phone etc), the taxable benefit is deemed to be nil.
PAYE Settlement Arrangements – a PAYE settlement agreement is a formal agreement between your employer and HMRC, the idea is to allow an employer to settle an employee’s tax liability on minor or irregular benefits or expense payments. A PSA passes the tax liability on such payments and benefits to the employer, so the employee effectively receives the benefit tax free. A PSA has administrative advantages as the employer makes one annual payment to cover the NIC and tax in respect of the benefits included in the agreement. Employees also have no tax liability in respect of amounts covered in a PSA, they also have no reporting responsibilities. A benefit or expense included on a PSA can be minor or paid on an irregular basis or given in circumstances where it is impractical to apply PAYE. Minor expenses include one off expenses, for example giving employees sports tickets.