Accounting and consultancy firm, Vantis recently warned the UK's hospitality industry that HM Revenue and Customs is likely to focus its attention onto benefits-in-kind in 2006.
According to Peter Davies, Manager at Vantis, the industry is being targeted due to the perception within HMRC that the industry fails to fulfil all tax and fiscal requirements set by the government.
Mr Davies explained that:
“Many companies believe that they do not provide benefits-in-kind, yet HMRC’s interpretation of the rules means that many do so unknowingly. The industry has been a target for some time with troncs and operation Gourmet."
"This is another step in HMRC’s attempts to bring the industry into line and one that we feel will be quite successful. Often what HMRC and employers classify as benefits in kind is very disparate."
"We have been expecting this for some time and would advise companies to review their current set up. While there may be a number of companies that are purposefully flouting the rules, we suspect that most are doing so out of ignorance rather than intent.”
According to Vantis, there are three main areas that companies should review. These are:
1. Uniforms.
A company may have invested in staff shirts, blouses, skirts or trousers to
appear more professional. While the company and staff don’t think of that
as a benefit, HMRC do, as it is considered “available for private use”.
This means that staff may wear the clothes to travel to and from work in, or
indeed could (if they really wanted to) wear them out of work. A uniform becomes
a benefit to be reported, costing staff tax and the company an additional National
Insurance charge. If a company pays for the clothes to be laundered, that too
is viewed as a benefit by the tax authority.
2. Late night taxis.
Mr Davis observed that this is: "Perhaps the most controversial topic. All employers have a duty of care
to their staff. For many it is nothing more than basic concern for (often female)
staff that leads them to provide or reimburse a taxi journey home after work.
Unfortunately, this can often lead to a hefty bill from HM Revenue & Customs."
Until recently all such taxi journeys were considered taxable and only a concession allowed certain trips to be paid for without tax. This concession is now enshrined within legislation allowing up to 60 journeys per year to be made under the “late working conditions”. These conditions are that:
• It is after 9pm and the employee is required to work later than usual
• There is either no public transport available or it would be unreasonable
to expect someone to use it
The late working conditions mean, however, that staff who routinely have to work to midnight and beyond cannot be provided with a taxi home tax-free.
3. Food and drink
Generally speaking any sustenance provide to staff will be taxable, but a concession
means that, if certain conditions are met, the Revenue will not charge tax.
The main thrust of this is that the offer of food is open to all employees and
is of a reasonable nature and, as an extra condition for the hospitality industry,
that the meals must either be consumed when the establishment is closed to members
of the public, or if not, that the meals are taken in a separate room or area
from customers.
Mr Davies concluded:
“Many employers will see providing these sorts of benefits as nothing more than looking after their staff. There are exemptions in many of these areas that companies can use but it is worth consulting an advisor to ensure that you are making the most of these exemptions."
"However, if a company does participate in any of the above, they need to consider whether or not the best solution might be to enter into a PAYE Settlement Agreement with the Revenue."
"In this, the employer will pay the tax on these items annually to HMRC. This avoids the cost being passed onto employees, which is possibly one of the best benefits that you could provide to your staff.”
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