Statutory Exemptions – Part one
Ordinarily, if goods or services are provided to employees by the employer it will generally give rise to a tax charge which is reportable on the P11D form or, through the payroll, if the employer has registered to do so.?
Employers can provide or reimburse certain expenses and benefits to employees that do not incur a tax and NIC liability. They must be specific and distinct payments towards actual costs incurred by the employee in carrying out their employment duties.
Additional expenses and benefits may be exempt from any liability when the employer pays a flat rate to employees as part of their earnings - this must be either a benchmark rate or a special bespoke/custom rate approved by HMRC, collectively these payments will fall under a statutory exemption if all conditions are met.
In this two-part review we will consider the conditions that apply to some of the more common types of benefits that fall under the exemption.
Annual events and Christmas parties
As the Christmas season draws near employers can provide either an annual event in the form of a Christmas party or multiple events. The total cost for all events must not exceed ￡150 a head, which includes partners, if invited, and any associated charges connected to travel and accommodation.
If more than one event is provided during the year employers must ensure the cap is not exceeded. So, for example if one event costs ￡80 and the other ￡75, only one event can be attributed to the exemption the second event will be fully taxable and cannot be partially offset against the cap.
Training costs
Genuine work-related training is defined as any training course or other activity which is designed to impart, instil, improve or reinforce any knowledge, skills, or personal qualities which helps the employee to develop in their job.
The way that the training is conducted is irrelevant it can be online, classroom based or a combination of the two, so long as it is directly connected to their employment. The method of payment also has no bearings, the cost can be paid directly by the employer to the third party or reimbursed to the employee.
Associated costs would also be exempt, for example if the employee attends a college or university the travel cost can be reclaimed.
In cases of qualifications, employers must be mindful of the wording in any agreements specifically where the employer requests that the qualification is necessary for promotional or progression reasons. Wording in agreements that suggest recovering a proportion of the training fees from employees if they resign after completing the course may be impacted by National Minimum Wage Regulations, equally if employees attend evening college the hours should be monitored to ensure compliance with NMW.
Retraining costs
Costs met by employers to assist in retraining staff in termination cases that are designed to assist employees in obtaining future work are exempt provided they have been employed with the same employer for at least 2 years up to the time they begin the course or at the time the employment ceased.
If the employee is e-employed within two years following the end of the course, then the exemption will not apply and the employer must inform HMRC within 60 days of this happening.
Medical Check-ups & Health Screenings
Employers can provide one annual health check which is generally made available to all employees. In addition, medical screenings can be provided where employees are identified as being at risk, possibly because of underlying health issues.
Employers can contribute up to ￡500 in a tax year to help with medical costs to assist in the return to work of an employee following a period of long term sickness absence, this would follow an assessment undertaken by a healthcare profession as part of the occupational health services or Fit for Work scheme. Health care professional’ means a registered medical practitioner, nurse, occupational therapist, physiotherapist or psychologist.
Any medical recommendations can only be carried out when the employee is:
A written recommendation specifying any treatment to be provided should be sent to the employer.
In part two we will continue to review further exemptions.
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