1. Provide your employees with a free works bus, or make a direct contribution to an existing local public bus service. Paying for employees to get to work is normally a taxable benefit, but the provision of a works bus is tax-free if the vehicle is designed to carry at least nine passengers. The bus can also be used to take employees to the local shops at lunchtime with no additional tax charge. The provision of free transport passes that cover a wide area, such as the London Oyster card, is not tax-free.
2. Supply your employees with one tax-free mobile phone each. Mobile phones, including smart-phones provided to employees, are tax-free as long as it is the employer rather than the employee who owns the phone and takes out the contract with the telecoms company.
3. Don't forget to party! Even the smallest business can host an annual tax-free social function for all its staff, including the directors and their partners. As long as the cost per head is less than £150, employees are not taxed for having a good time and the company benefits from full tax relief on the expense incurred.
4. Check how much you pay for the fuel used on business trips in your company cars. Employers can now pay up to 26p per mile tax-free (depending on the size of the car’s engine and fuel type) to employees who pay for the fuel used in the company car they drive. If your company has any cars that are not very fuel-efficient, you can negotiate a higher tax-free mileage rate with the local tax office.
5. Pay your employees who have children partly with childcare vouchers that they can use to fund nursery and after-school care. The first £55 a week paid as childcare vouchers is free of both tax and employers’ and employees’ NICs. You have to offer the childcare vouchers to all your employees who work at the same site, and the vouchers must not be exchangeable for cash. However, those employees who join the childcare voucher scheme after 5 April 2011 may be taxed on part of the value of the vouchers if they pay 40% or 50% income tax.
6. Reduce your expenses hassle by paying your employees a flat rate for meals they buy while working off-site, or when they work unusual hours. You can make a tax-free payment of £5 for one meal, £10 for two meals and £15 for an evening meal, subject to certain conditions. You must agree this arrangement with your tax office as part your dispensation for business expenses.
The Financial Conduct Authority (FCA) does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme.
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