Perk up you and your boss by talking tax-free benefits

In the good old days people could still obtain low-tax benefits from the companies for which they worked, most notably company cars. The common perception now is that the government has clamped down to such an extent on these perks that employees and executives may just as well take the additional salary and pay the tax. But is that correct?

Benefits can help to motivate, retain and recruit staff, and the government has gone some way towards helping by encouraging wider share ownership by employees in the companies for which they work by allowing tax incentivised share option schemes. These are all very well, but the benefits tend to be postponed until the value of the company shares has gone up or until a minimum period has elapsed. So, are there any more immediate benefits that are still tax efficient?

Fortunately a number of tax-free benefits are still available although they are often very under-used.

It is well known that tax-free mileage allowance payments of up to 40p per mile can be paid to employees who use their own cars for business travel. However, where an employee is paid less than the amounts approved by HMRC, he can claim a tax-relief on the difference in his tax return. Many companies pay a lot less than the statutory limits but very few employees know to claim the difference in their tax returns.

Where an employee carries one or more passengers in either a car or van for business purposes, a tax free "passenger payment" of 5p per passenger per mile can be paid by the employer irrespective of whether the vehicle is the employee's own or a company vehicle.

For those who work beyond 9pm with no public transport available, or where it would be unreasonable to expect an employee to use it, the employer can make a tax-free payment of the travel expenses. This would cover, for example, taxi costs.

Another very underused tax-free perk relates to relocation costs where the employee needs to move as a result of taking up the employment or as a result of a change in the place where the duties are carried out. The company can make a tax-free contribution of up to 8,000 towards the relocation costs.

The provision of free or subsidised meals on the employer's business premises can be tax-free provided that this is offered to all staff and not simply to senior executives, and provided that the meals provided are on a "reasonable scale". Gourmet meals would be ruled out, but if the sandwich van passes by, the company can buy sandwiches for all employees without the cost being regarded as a taxable benefit.

The provision of a mobile phone may be made tax-free to any employee, although this is now restricted to one mobile per employee.

If you come up with any good ideas as an employee of the company, this can be good news for both parties. The employer gets the benefit of the good idea and provided that a formal employer suggestion scheme has been set up, a tax-free award of up to 5,000 may be made to the employee.

A company can also make a low interest, or even interest-free loan to an employee for any purpose. Provided that the amount of the loan does not exceed 5,000, no taxable benefit will be deemed to accrue on the interest forgone by the employer. This is a much cheaper alternative to borrowing the money from a bank.

Finally, and most importantly, employer contributions to a registered personal pension scheme can be made tax-free so far as the employee is concerned. The company will obtain tax relief on the payment.

Individually these tax-free benefits may not come to a lot, but taken collectively they can amount to a tidy tax-free sum each year.

Ronnie Ludwig is a partner in the private wealth group at Saffery Champness chartered accountants in Edinburgh