and retaining top talent is harder than ever, especially with a new generation of
head strong individuals who are not afraid to job hop and seek the work/life balance
complexities of what companies are offering by way of remuneration packages now
goes way beyond monetary rewards. For example flexible working hours, pension,
child care vouchers, car allowance, company car, mobile phone, travel cost
loan, gym membership, after work drinks, incentive trips away, gift vouchers,
beer fridge, training, unlimited holiday, charity days/volunteer projects,
discounts with local suppliers, office food like fruit or pizzas, shares in the
business – the list is endless. It’s great to be innovative to keep your top
talent incentivised however don’t ignore the tax implications of these
benefits. Some may cost you more than you anticipate, especially if you are not
compliant with HMRC legislation.
Depending on the type of benefit
available and whether the cost can be directly attributable to an employee
depends on the tax consequences and HMRC compliance. Also consideration needs
to be made on whether the employee suffers the tax or the company. In some
cases, such as a sales incentive trip to Ibiza, it would be bonkers for the
employees to suffer the tax consequences. They would be reluctant to hit those
sales targets and it would completely defeat the objective of having an
incentive trip abroad.
PAYE Settlement Agreement is one option whereby the employer agrees to settle
the taxes on behalf of the employee. It is obtained by way of a written request
to HMRC and reporting is dealt with after the end of the tax year, submission
by 5 July. Many recruitment companies have these agreements in place as staff
entertaining is a significant cost in a sales driven environment.
If you would like to know more about the tax consequences of the most popular incentive packages then please click the button below to access the full article.