Tax free payments to staff - Finance Dublin
At a time of very high marginal tax rates applying to the salaries and benefits provided to employees, payments that can be made on a tax free basis for the employee, and carrying the advantage of a tax deduction for the employer, should be very attractive to both the employee and the employer.
Employers are required to provide employees with access to a pension scheme
Pension contributions can be made by an employer to either their employees’ PRSAs or to an occupational pension scheme. The employer contribution is fully tax deductible and is tax free for the employee, other than the USC applying where payments are made to a PRSA.
Cycle to work scheme
An employer can purchase a new bicycle and safety equipment on behalf of an employee, tax free, up to a value of €1,000, provided that the bicycle and equipment are mainly used for travel to and from work or for other work related journeys.
Certain payments to E-workers
Where employees work for substantial periods outside the employer’s business premises in the course of the performance of the duties of their employment, an employer can cover certain costs on a tax free basis:
- Equipment such as computers, printers, office furniture, telephone line and internet access provided to facilitate work in the employee’s home where personal use is incidental.
- A contribution of up to €3.20 per day for light and heat expenses. The employee can also claim additional amounts on a vouched basis where actual costs incurred exceed this level.
- Costs of business calls on home and personal mobile phone.
Sports and recreational facilities
These can be made available to employees’ tax free where the facilities are on the employer’s premises for the use of employees generally.
Certain long service awards for employees
Long service awards are not taxable where the award is for service of at least 20 years; the award is of a tangible article of reasonable cost; the cost does not exceed €50 per year of service; and no similar award has been made to the employee within the previous 5 years. The treatment does not apply to awards made in cash or in the form of vouchers or bonds.
Free periodicals and newspapers
Where these are provided by the employer and are generally related to the employer’s business, a taxable benefit does not arise.
Reasonable employer contributions to employee social club
These can be made tax free where membership of the club is available to all employees.
Use of a company vehicle
A vehicle can be provided tax free where private use is secondary to business use or where the vehicle is not capable of being used as a private vehicle.
Mobile phones provided for business use
Incidental private use is permitted without giving rise to a charge to tax.
Examination awards and exam fees
Awards made to an employee for passing exams or for acquiring qualifications bearing some relationship to the employee’s duties can be made tax free, once regarded as a reimbursement of expenses likely to have been incurred.
Refunding of course and exam fees can be made tax free where the course is relevant to the employer’s business, leading to the acquisition of knowledge or skills necessary for the duties of the employment or to increase the effectiveness of their performance.
Second home telephone account
The provision of a home telephone to an employee for business use where private use is merely incidental.
Professional subscriptions or membership fees
These can be paid tax free where the subscription is required to carry on employment duties. Be careful about subscriptions that are not directly related to the work activity of the employee.
Where the employee is required to undergo a medical check-up by the employer and the employer pays the costs there are no tax implications for the employee.
The provision of a travel pass to enable an employee travel to work can be made tax free.
Mileage and subsistence
Mileage expenses to cover the use of personal motor vehicles by employees for business use can be paid tax free where adequate records are kept and rates paid do not exceed the civil service rates. Subsistence can also be paid to employees who are outside the office for more than 5 hours in the carrying on of their employment duties. Foreign business travel and subsistence can also be paid.
Non-cash gift – voucher or benefit
The limit for giving a tax free voucher to an employee was recently increased from €250 per annum to €500 per annum. It has become more common for these type of vouchers/benefits to be provided around Christmas or holiday time and in particular as they are tax free there is an added attraction to the receiver.
While it is generally perceived that personal tax rates are very high in Ireland there are many ways, with a little thought, that benefits can still be provided in a tax free manner. Sometimes the little things are more important in attracting and retaining employees and with the tightening labour market employers need to be more flexible and creative in looking after their staff. One small word of caution: you generally cannot reduce a salary (salary sacrifice) and make up the difference in tax free benefits.
This article first appeared in Finance Dublin magazine June 2016 and was written by Frank Greene, Tax Partner and Nóirín Cahalane, Tax Manager in Mazars.