Tax exempt benefits

By Tolley
OMB_tax_img8

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Tax exempt benefits
  • Pension contributions
  • Removal expenses
  • Childcare
  • Workplace benefits
  • Hospitality and awards
  • Homeworking
  • Other tax exempt benefits

There is a long list of benefits which are completely exempt from tax. This note highlights some of the more familiar tax exempt benefits. Additional information is available in the Non-taxable benefits and Non NIC-able benefits guidance notes (subscription sensitive) in the Employment Taxes module.

Pension contributions

No taxable benefit arises if an employer pays into either the employee’s occupational pension scheme or into the employee’s personal pension scheme.

ITEPA 2003, s 307

One of the most valuable benefits that employees receive from their employers is an employer’s contribution to the employee’s pension scheme. This is exempt from tax as long as the pension scheme has HMRC approval and pension contributions do not exceed the annual or lifetime allowances. For more information, see the Pension contributions guidance note.

Removal expenses

The reimbursement of removal expenses is exempt, up to a maximum amount of £8,000. For example, if an employee is transferred to another office and the employer pays the relocation expenses, no taxable benefit will arise as long as the cost of the move is less than £8,000.

ITEPA 2003, s 287

The exemption applies to ‘removal benefits’ and to the ‘payment or reimbursement of removal expenses’. Such expenses will qualify if they are ‘reasonably provided in connection with a change in the employee’s residence’, ie in respect of a change in the duties and / or location of the employment or on the employees becoming employed.

ITEPA 2003, ss 271, 273

Qualifying removal expenses will include:

  • legal fees in connection with the acquisition of a new residence (including stamp duty land tax)
  • any such abortive acquisition costs

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