Company Car and Other Non-Cash Benefits
Benefits in kind are commonly offered to employees in addition to their basic salary and often depend on personal requirements, job status and prevailing economic forces. Generally for those earning over £8,500 per annum, all benefits in kind (except expense claims) are taxable on the cash equivalent value. Such benefits may include cars, private health care, holidays, loans, life assurance, accommodation, relocation allowances and any other entitlements beyond the legal minimum.
A key preliminary question from your point of view as the employer will be whether you acquire vehicles on the basis of purchase or lease. You may want to reserve the right, in particular in relation to leases cars, to provide replacement cars (of similar value and status) to employee concerned.
Whenever providing company cars a car policy should be issued.
Increasing tax and NIC on company cars has led to many employers and employees shifting to other methods of providing such benefits including cash payments. Insurance is an additional consideration.
Care will also need to be taken with reimbursement of business and private mileage as mileage payments for use of the employee's own car are subject to Inland Revenue limits and the employee will pay tax on any excess. No tax is payable by employees using pool cars.
Private healthcare, this is a taxable benefit chargeable on the cost to the employer.
All employees are entitled to a minimum of 5.6 weeks annual paid leave. This entitlement cannot be substituted by payment in lieu (other than in the event of termination of employment).
There are certain notice requirements for the taking (and refusing) of holiday.
Interest free loans or low interest loans to employees, are taxable benefits if the loan exceeds £5,000.
Accommodation can be provided tax free if it is necessary for the employee to live there to fulfil his duties or to perform them better. A director with over 5% of the share capital in the company is excluded from this benefit in any event.
The maximum amount payable for relocation expenses without attracting tax liability is £8,000. Equal pay for men and women includes benefits and hence packages should not be discriminatory.