Budget 2006

Benefits in Kind

For directors, and employees earning at the rate of £8,500 or more per tax year including expense payments and benefits

Cars and fuel

• benefit based on list price (including accessories)¹ for a car and £14,400 for fuel
  
• set percentage, percentage in most cases between 15% and 35%, determined by carbon dioxide emissions for car in grams per kilometre (g/km)
  
• emissions not exceeding 140g/km 15%
  • increase for each whole 5g/km above 140g/km 1%
  • supplement for cars running solely on diesel² 3%
  • maximum percentage 35%
• special rules for alternative and mixed fuel cars, classic cars, automatic cars for disabled drivers, cars without a carbon dioxide emissions figure and those registered pre 1 January 1998
• car benefit reduction available for capital (maximum £5,000) and private use contributions
• benefit reduced if car or fuel not available for whole year subject to fuel anti-avoidance provisions
• no fuel benefit if employee required to pay for and actually pays for all private fuel or if fuel is only provided for business journeys
  

¹ Maximum price £80,000
² 145g/km 2004/2005, 140g/km 2005/2006 and later years

Vans

No separate charge on fuel provided for private motoring (benefit of £500 from 6 April 2007)
From 6 April 2007 single benefit of £3,000 for unrestricted private usage irrespective of age of van

³ At the end of the tax year
⁴ Per van
⁵ Reduced by private use contribution and if the van is unavailable or shared
⁶ Unless used wholly or mainly for private purposes

Cheap loans

Benefit equivalent to excess of official rate⁷ over interest charged
Exempt if loans total no more than £5,000

⁷ 5% subject to review in the event of significant rate changes (different rates may apply to foreign currency loans)

Reliefs for all employees (not exhaustive)

Childcare

No income tax liability for

• employer provided nurseries
• up to £55 (£50 2005/2006) of childcare vouchers per week

Green transport

No income tax liability on

• works’ buses or minibuses, or subsidies to public bus services
• loan of cycles and cycling safety equipment used mainly for qualifying journeys including home to workplace travel

Incidental costs of homeworking

• No income tax liability for reasonable additional household expenses incurred in carrying out duties at home
• Claims over £2 per week require documentary evidence

Incidental overnight expenses

Payments to employees on qualifying trips

• no benefit if employer pays up to £5 per night for UK trips or £10 per night for overseas trips
• taxable in full if limit per trip exceeded

Long service awards

No income tax liability for non-cash gifts (subject to exceptions)

• after at least 20 years service
• up to £50 per year of service

Mobile phones

No liability to income tax for loan of mobile phones to employees subject to limit of one phone per individual (no limit on number 2005/2006)

Parking provision and expenses

No income tax liability for the provision of workplace parking

• includes space for car, van, motorcycle or cycle
• within reasonable distance of workplace

Relocation expenses

Removal benefits and payment or reimbursement of removal expenses in connection with an employee’s change of residence exempt up to £8,000. Detailed rules apply⁸

Annual Staff parties

No income tax liability on cost of party if VAT inclusive amount, aggregated if more than one, does not exceed £150 per head per annum

⁸Detailed rules apply

The figures shown here are subject to ammendment as the Finance Bill passes through Parliament.

This information has been prepared only as a topical guide to tax and personal financial matters. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material contained in this publication.