Edwards Greene Tax Tips 2020

KEY GUIDE | April 2020 | Tax Planning Tips 9 Employment and remuneration – looking after your employees 38 Make the most of the tax advantages offered by salary sacrifice schemes. Salary sacrifice schemes involving pension contributions (see Tip 22), childcare, low-emission cars (CO 2 emissions up to 75g/km) and cycle to work schemes (see Tip 48), can continue to be used. If set up correctly, both the employee and the employer can benefit from certain tax advantages and save NICs. 39 Provide zero- or low-emissions company cars. For 2020/21, all zero-emissions (electric) company cars can be provided to employees without any taxable benefit arising. Cars registered after 5 April 2020 with CO 2 emissions of up to 50g/km also carry no taxable benefit if the electric-powered range is 130 miles or more. Additionally, the employer can claim 100% capital allowance for new car purchases with CO 2 emissions of up to 50g/km. 40 Help employees work at home by paying a tax- free allowance. Employers can pay £6 per week (£26 per month) tax- and NIC-free to employees who work at home under a home working arrangement. This is where the employee and employer have agreed that the employee will work at home regularly. If the employee’s office is closed, as many are during the Covid-19 pandemic, or an employee has been advised to self-isolate at home, HMRC accepts that those situations meet the home working requirement. 41 Pay for pensions advice for employees. You can pay for up to £500 of individual pensions advice per person per tax year when your employees are approaching retirement age, or are in ill health, and they will not be taxed on this useful benefit. You could also provide pensions advice under a scheme which is open to all employees generally regardless of age or health. 42 Provide free transport to help employees get to work. If your employees cannot work from home, you can help them safely travel to work by providing a works bus to pick them up either directly from their homes or from an agreed point. The vehicle used must seat at least nine passengers. There is no taxable benefit for the employees as long as the bus is used mainly by your employees and their children. 43 Provide your employees with an annual health check and eye test. The health check is free of tax. Medical treatment paid for by an employer is generally a taxable benefit. However, there is an annual exemption of up to £500 where you fund medical treatment that will assist an employee’s return to work from sickness or injury. The eye test is also tax free if the employee needs to use a computer screen or similar display screen as part of their job. Any special corrective lenses required to use that equipment can also be provided tax free. 44 Pay employees a tax-free allowance for each night spent away from home on business. A £5 tax- and NIC-free allowance can be paid for nights spent away in the UK on business. This is in addition to the cost of the employee’s accommodation, meals and travel, which can be reimbursed if receipts are produced. The tax-free amount is £10 per night if the overnight stay is abroad. EXAMPLE James is employed by FGH Ltd on an annual salary of £80,000. Rather than making pension contributions of £5,000 personally, James agrees to sacrifice £5,000 of his salary in return for FGH Ltd making £5,000 of pension contributions on his behalf. James’ tax position is unchanged, but both James and FGH Ltd benefit from NICs only being payable on salary of £75,000 instead of on £80,000.