Remuneration

6. Benefits

NI is payable on all taxable benefits-in-kind. If there is tax on a benefit, the employer has to pay NI at 12.8 per cent.

6.1 Pensions are usually the first benefit provided for employees.

Contributions are treated favourably, with no tax or NI to pay on HMRC-approved schemes.

6.2 Cars and car parking are still high on the list of benefits that employees find attractive.

• Though the tax advantages of a company car have been reduced, most employees still accept a car, if offered as they can avoid the hassle and costs of running their own car.
• A parking space at or near the place of work can be a valuable tax-free benefit.

6.3 There is no tax to pay on mobile phones provided by an employer, but this exemption only applies to one mobile phone per employee. Second and subsequent phones provided to an employee or members of his or her family will be liable to tax. (Note that a Blackberry is not regarded as a mobile phone by HMRC so does not attract the same tax exemption.)

• If employees have part of their home phone bills reimbursed, including some private call costs, they will have to pay tax. It may be better to provide mobiles.

6.4 Childcare vouchers up to £55 per week per employee can be provided on a tax and NI free basis.

6.5 Living accommodation can be tax free for those who have to live in a certain place to do the job (eg caretakers and oil rig crews).

Elsewhere, it is taxed as a benefit. But even with the tax charge, potential recruits may find the offer of accommodation attractive.

6.6 There are several minor benefits that cost little to provide, are valued highly by employees and get favourable tax treatment.

• Staff discounts (on your products) are not taxed and can be an attractive perk (eg in retailing, transport and travel).
• Free or subsidised meals are popular with employees and are not taxed as benefits provided they are made available to all employees and not a selected few.
• Personal loans of up to £5,000 are not taxable and do not attract NI. Offering season ticket loans or interest-free loans to clear credit card debts can build loyalty.
• Long-service awards do not attract tax, providing the employee has worked for the business for 20 years. The value can be up to £50 for each year of service.
• Annual parties (or similar celebrations) paid for by the employer are tax free, up to a cost of £150 a head.
• Bicycles made available by an employer to employees are not liable to tax or NI contributions.