Helping remote workforces with tax-efficient benefits

You don’t need me to tell you that working practices have been perceptibly altered by coronavirus. According to the latest ONS data, nearly half (47%) of people in employment did some of their work from home in April, with the vast majority (86%) saying it was because of the pandemic.

This much we know, but what’s only starting to be understood are the subtly different needs of home workers. As employers make concerted efforts to keep morale and engagement high among remote teams, some are showing huge creativity in the support they’re offering, beyond furnishing homes with desks, ergonomic chairs and computer equipment. I’ve seen companies facilitating online mindfulness and poetry sessions, care packages and coffee-shop vouchers.

But given that company purse holders are being understandably cautious, businesses need to know what benefits are the most tax efficient, for them as well as their employees. With help from the good folk at accountancy firm LK & Associates, we’ve put together a list of the most tax efficient benefits for remote workforces:

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1. From 6 April 2020 employers can pay employees £26 a month to cover additional costs for working from home. Employees do not have to keep any records. But it’s worth noting that workers cannot claim this tax relief if they choose to work from home, so it would be prudent to review employee contracts in this light.
2. If you provide equipment, services and supplies to an employee who works from home, you do not have to report or pay anything if they’re only used for business purposes, or if any private use is insignificant. This includes computers, printers, desks, chairs and stationery.
3. Employers can give so-called ‘trivial’ gifts to employees which are corporation tax deductible and employees do not pay tax on them. These gifts must be £50 or less each and must not be a reward for service/performance or in the form of cash or a cash voucher. They cannot be for good work, as that would count as a bonus that would have to be taxed but presents for birthdays, weddings, new babies, Christmas, etc. all count. Such gifts could include loaded coffee cards (great for remote workers who want a change of scene).
4. Employers can reimburse the additional costs incurred by employees working from home, such as gas, electricity and water bills, and insurance. But, employees would have to show proof of the actual increase when claiming. The best thing an employee could do would be to document in any sensible way the increase they believe comes from working from home, then if HMRC were to enquire there would be information readily available. (In reality this may prove to be onerous compared with the potential tax saving.)
5. Employees can claim mileage of 45p per mile when making journeys for work e.g. to see clients or pick up home office equipment (they cannot claim their normal commute into the office). They must log the mileage and the purpose of the trip in order to make a claim.
6. The Cycle to Work Scheme is an employee benefit that saves employees 25% – 39% on bicycles and accessories. It’s set up as a ‘salary sacrifice’ so staff pay nothing upfront. The sacrifice is taken from employees’ gross salary (before tax) means they will pay less income tax and NI. Normally, the bike has to be used for commuting at least 50% of the time but HMRC specifically states it does not require anyone to keep a log of their mileage and will not make special enquiries if it is clear there is substantial use for qualifying journeys. It doesn’t appear to be an area where HMRC has given specific COVID-19 exemptions so this benefit would best suit those who split their week between home and a workplace.
7. Online fitness classes are taxed in the same way as gym memberships: they are considered a benefit in kind. However, just as gyms may offer reduced rates for employers in return for multiple person sign ups, apps and online services may offer similar corporate discounts, so it’s always worth enquiring directly.
8. Robyn Milstead, senior tax advisor at LK & Associates, suggests looking at incentivising staff with the promise of share schemes based on reaching specified targets. She explains: “Often such schemes can be set up in a way that reduces employees’ exposure to income tax and national insurance. Employers may find these schemes attractive as they do not require the company to have significant cash in the bank to provide the incentive.”

Talk to the friendly team at Connor Broadley to find out which employee benefits would best suit your company. You can reach us on: TeamBC@connorbroadley.co.uk

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