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Tax Questions: Helping Staff in ‘Cost of Living Crisis’

The cost of living crisis is hitting everyone, including small businesses.

It’s a tough time with higher prices and staff shortages causing difficulties witnessed every day from supermarkets to airports. While there are several new tax-free government payments to help families deal with the increased cost of living part funded by a windfall tax on the energy companies, it is still becoming increasingly challenging for many people today.

Payments include Energy Bills Support Scheme (one off £400 to all households); a means tested Cost of Living Payment of up to £650 and Help for Pensioners and those on Disability Benefits.

Increased wages

Employers are required to raise the wage rates of employees on the National Minimum Wage by 6.6% for pay periods starting from 1 April 2022, but some employees may still be struggling to make ends meet. Here are a few things you could do as a business to help those employees; these ideas are all tax-free for the individual, except for the small benefit charge on electric cars.

Added benefits (food and transport)

You can provide free or subsidised meals to your employees at your premises. As long as the food is provided equally to all employees, or all those working at a particular site, there’s no taxable benefit for the workers. Providing free or subsidised transport for employees to get to work can help those who struggle to pay for fuel for their cars.

A works bus that transports your employees to and from work can be used for the full journey, or part of it when employees are collected from a pick-up point. The vehicle must be designed to carry at least 9 passengers, and the service must be available generally to any of your employees. Alternatively, your business could work with the local authority to subsidise a key bus route for your workers.

An employee can use a company electric van for any private or business journeys, with zero taxable benefit. Electric company cars are taxable on the employee, based on 2% of the list price of the vehicle. However, that benefit also covers the cost of the insurance, servicing and repairs the company incurs in respect of the vehicle. Providing electric charging points at work so that employees can charge their own or company vehicles is also a tax-free benefit.

Many employers provide a season ticket loan to help employees pay in advance for commuting costs, such interest-free loans (up to £10,000) and can be provided for any reason. The loan must be repayable, and a loan agreement drawn-up.

Tax-free gifts

Just as directors can receive tax-free gifts worth up to £50 from their company (see Trivial Benefits for Directors), so can employees. Buying a school uniform for a worker’s child, or a food hamper on their birthday, may make a big difference. The £300 annual cap only applies to directors and their family members, not other employees.

Let’s Talk

For help calculating any staff schemes with maximum tax efficiency, talk to our tax team on Let’s Talk.

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