Taxable vs Nontaxable Fringe Benefits: Ultimate Guide

Most employers will give you these free of charge. They include things like holidays, sick pay, maternity/paternity leave, pensions, childcare vouchers, gym memberships, health insurance, etc. You might even receive money towards your rent or mortgage.

Some employers offer them without asking. This could mean that you don’t need to fill out anything at work, or it could mean that you just need to tick a box saying that you agree to something.

These benefits and expenses are often referred to as ‘taxable’ amounts because you’ll usually have to pay income tax on them.

Accommodation, supplies and services on your employer’s business premises

For tax purposes, employers must provide all goods or services supplied on their business premises to employees which are used by them in the course of their employment. This includes things like meals, accommodation, uniforms, office equipment, etc. If you supply such items, it is important to ensure that you keep records of what you spend. You could claim expenses against your salary, including travel costs, telephone calls, postage, stationery, printing, photocopying, laundry, cleaning, repairs and maintenance.

You should also check whether there are any exemptions under the Income Tax Act for particular items. Some examples include:

• Goods or services supplied to an individual for use in the course of employment, e.g., food, clothing, transport, medical treatment, training courses, etc.

• Equipment and facilities provided to individuals for use in the course or employment, e.g. computers, mobile phones, printers, fax machines, scanners, copying machine, etc.

• Supplies and services provided to an individual for use outside working hours, e.g., internet access, broadband connection, email account, etc.

• Travel expenses incurred while travelling away from home for the purpose of carrying out duties related to employment.

• Any other expense that is necessary for the performance of the job.

If you have any questions about how to calculate your taxable income, please contact our team.

Supplies and services provided to you other than on your employer’s premises

Employers are required under the Fair Work Act 2009 to provide items such as food, clothing, accommodation, medical treatment, transport, tools, equipment and materials to employees during their work hours. These are known as “supplies and services”. However, there are some exceptions to this rule. For example, employers cannot require employees to purchase goods or services that are unrelated to their employment. This includes things like personal grooming products, entertainment, gifts, sports tickets, meals, alcohol and tobacco.

However, there are times when an employer might want to provide benefits to their employees. These include things like uniforms, training, travel expenses, sick leave, annual leave, superannuation contributions, insurance coverages, child care assistance etc. In fact, many businesses choose to offer additional benefits to attract and retain good workers.

The main thing to remember here is that most of these items are considered “personal use”, meaning that they do not count towards the total number of hours worked. Therefore, if an employee uses up their annual leave entitlement, for instance, they won’t be able to take advantage of the extra days off.

Free or subsidised meals

If you work for an organisation that provides free or subsidised meals, you are entitled to claim expenses for those meals under section 905(1)(b) of the Income Tax Act. In addition, you can claim travel costs incurred in travelling to and from work. You do not need to pay income tax on the amount of money you receive each month for free or subsidised meals.

In order to qualify for the deduction, you must prove that the meal is provided either:

• On the employer’s business premise; or

• At a place where the employee is required to eat because it is part of his/her duties.

You can use one of the following methods to show that the meal meets these requirements:

• A receipt showing the name of the restaurant or café;

• An invoice;

Meal vouchers

A meal voucher is a tax-free gift card that allows you to purchase food items at restaurants, grocery stores or convenience stores. A meal voucher is different from a coupon because it does not expire. However, there are certain restrictions on how many vouchers you can redeem each month. For example, you can’t buy multiple coupons for one item.

There are three types of meal vouchers:

• Cash value – These are the most common type of voucher. They allow you to pay for purchases with cash or debit cards.

• Gift card – This type of voucher allows you to pay for purchases using gift cards.

• Prepaid card – With this type of voucher, you can prepay for specific amounts of money. When you’re ready to spend, just present the prepaid card to the merchant.

The amount of money you receive depends on the type of meal voucher you choose. If you select a cash value voucher, you’ll receive the full face value of the voucher plus 10% sales tax. If you select a gift card voucher, you’ll receive 80% of the face value of the voucher, plus 5% sales tax. And if you select a prepaid card voucher, you’ll get 60% of the face value, plus 3% sales tax.

You must report the receipt of a meal voucher as taxable income. Your employer will withhold taxes from your paycheck.

Medical treatment abroad

If you go overseas for medical treatment, it could qualify as a tax deductible expense. This includes treatments such as dental surgery, physiotherapy, eye operations, cosmetic procedures, fertility treatments, and even childbirth. You do not have to claim anything from HMRC if you meet certain criteria.

Your employer will reimburse any expenses you incur while away from home. If you are self employed, you may be able to claim for expenses you incur while travelling to see clients. However, you cannot claim for any expenses relating to your personal use of accommodation or transport.

You must make sure that you take out travel insurance. If you don’t, you won’t be reimbursed for any expenses that arise from accidents or illness.

Medical treatment to help you return to work

If you are injured while working, your employer must provide medical care, including physical therapy, occupational therapy, speech therapy, psychological counseling, pain management and other treatments, to help you return to the workforce. If you suffer from a serious injury, such as a broken bone or severe head trauma, your employer is required to provide ongoing medical care even if it isn’t covered under workers’ compensation. This includes providing rehabilitation therapies like physical therapy and occupational therapy.

Your employer must pay for any treatment that meets the following criteria:

1. Is medically necessary;

2. Is prescribed by a licensed health professional;

3. Is recommended by a physician;

4. Is not experimental or investigational;

5. Does not require anesthesia; and

Health screening and medical check-ups

Your employer can provide you with up to two free health screenings per year. These include eye exams, blood pressure checks, cholesterol tests, cancer screenings, and others. Some employers offer additional benefits such as vision care, dental care, and even fitness programs.

Eye tests and corrective lenses are exempt from taxes. If you already paid for the cost of an antigen test, you don’t owe income tax on it.

Antigen testing costs are exempt from income tax if you pay for them. You don’t owe income tax if you receive reimbursement for those costs before taking the test. And you don’t owe income taxes if you take the test before or after receiving reimbursement for the cost of the test.

Nurseries and playschemes

The law requires nurseries and playschemes to make nursery places available to all employees who want to use them. This applies regardless of where you live or work. If you work in a place where there are no nursery places, you can ask your employer to provide you with one. You can also choose another place to go to during working hours.

If you work in a place that offers childcare facilities, the law does not apply to those places. However, it still applies to places run by your employer alone. In such cases, your employer cannot refuse to provide you with nursery places unless there is good reason for doing so.

Childcare vouchers

Qualified childcare vouchers are not taxable. Excess childcare vouchers are taxed if you receive them through an employer. Use the correct amount of child care voucher to avoid paying taxes on unused childcare vouchers.

Other employer-supported childcare

Qualifying childcare includes care provided to employees by employers or other third parties who meet specific criteria. Qualifying childcare does not include childcare provided by a parent or spouse.

Employer-provided childcare qualifies if the employee receives it directly from his or her employer. An employer must pay all costs associated with such childcare.

The appropriate amount is based on how many hours the employee works each week multiplied by the hourly wage paid by the employer. If the employer pays less than the appropriate amount, the difference is taxable income.

If the employer pays more than the appropriate amount, excess amounts over the appropriate amount are taxable wages.

Certain living accommodation

Living accommodation is usually provided to workers who work long hours or are based in areas far from their place of employment. Employees do not normally receive a salary during working hours, and therefore must find somewhere else to live. If you choose to rent out your property, you could be entitled to a tax deduction. However, it is important to note that there are some exceptions to this rule.

You can claim living expenses if you meet the following criteria:

• You are employed by a registered charity;

• You are self-employed;

• You are a member of the armed forces;

• You are retired;

• You are unemployed;

Payments by your employer towards additional household costs where you work at home

If you work at home, you might receive payments from your employer for your reasonable additional household costs. These include things like internet access, phone bills, electricity, heating, water and cleaning products. If you earn less than £16,250 per annum, you won’t pay Income Tax on these amounts. However, you must still declare them on your self assessment tax return.

You don’t need to enter these payments into HMRC’s online system. They’re completely separate from your earnings.

Incidental overnight expenses

These are payments made for incidental expenses incurred while traveling away from home overnight. They include accommodation costs, meals, laundry, telephone calls, room service, taxis, tips, incidentals, etc.

There are two different categories of such expenses: those where the person staying away from home overnight stays away from home overnight; and those where the person does not.

A typical daily incidental expense allowance is £10 for overseas trips and £5 for trips within the United Kingdom. However, there are no limits on how much you can claim. You just need to keep track of what you spend.

Travelling expenses of directors

A recent decision of the Singapore Court of Appeal clarified what constitutes “reasonable travelling expenses”. In the case, it was held that a director had failed to prove that his expenses were reasonable because there was no evidence to show how much time he spent on board the ship during the trip. He was therefore liable for the full cost of the trip.

The court noted that while the relevant provisions do not define “reasonable”, it is clear that the term implies that the expenses claimed must be both necessary and reasonable. This includes being incurred for the purpose of promotion of the company’s interest.

In addition, the court stated that a director cannot claim an expense where he/she is doing absolutely nothing for the company. For example, a director cannot claim a travel expense if he/she does not attend meetings on board the ship. However, the court did note that a director could still claim an expense where he attends meetings on board the ship even though he/she does not actively participate in the discussions.

Travelling expenses of group company employees

The French government has announced it will introduce a tax on business journeys, including those taken by employees of companies based outside France. This measure aims to reduce the number of people taking advantage of low cost flights to avoid paying taxes.

This move follows similar measures introduced in Germany and Spain. In France, the tax applies to all trips taken by employees of companies located outside the country. They must declare all such trips, regardless of whether they are paid or unpaid.

Business journeys include all journeys taken during an employee’s employment period. These include trips to conferences and training courses, visits to clients or suppliers, and any other journey undertaken while employed by the company.

A business trip includes travel within France. Travel outside the country requires prior authorisation from the employer. Employees must declare all trips they make during working hours, even though they are related to their jobs.

Travelling and subsistence expenses following strike disruption

The cost of travelling and subsistence during strikes varies depending on whether the strike is ongoing or intermittent. If the strike is ongoing, it is likely to cause significant disruption to your working life. This includes loss of income and potential job losses. You may also find yourself having to pay for accommodation and food while away from home. If the strike is intermittent, you may still face costs such as hotel bills, meal expenses and travel costs. These are known as reasonable expenses.

If you are considering taking part in a strike action, it is important to consider the financial implications. A union representative will usually provide information about how much money you might lose. They will also advise you about what benefits you may receive. For example, some unions offer free legal advice, assistance with childcare arrangements, and access to counselling services.

You must notify your employer within 48 hours of starting work about your intention to take part in a strike action. Your employer is legally required to give you notice of your entitlement to paid holiday and sick leave. However, if you do not inform your employer, you may be liable to pay back wages for the days you did not work.

In addition, if you are involved in a dispute over terms and conditions of employment, you should always seek independent legal advice. This is because the law allows employers to deduct certain amounts from your pay without giving you proper notice.

Disabled people’s cost of travel between home and work

The government is planning to introduce legislation to ensure disabled people do not pay more for travelling than able bodied people. The move follows research suggesting that disabled people face significant barriers when it comes to accessing public transport. A survey carried out by Disability Rights UK found that disabled people spend up to £1,500 per annum on additional costs when travelling. This included extra fares, car hire, taxis and parking fees.

The government is proposing to amend the Equality Act 2010 to make sure disabled people do not pay a higher price for public transport than able bodied people – including for journeys between home and work.

People who receive assistance with the costs of travel include those who receive benefits because of an illness, injury, disability or accident which lasts for six months or longer.

Assistance with the cost of travel can be accessed via public funds schemes such as the Attendance Allowance, Carer’s Allowance, Employment Support Allowance, Jobseekers Allowance, Housing Benefit, Income Support, Personal Independence Payment, Severe Disablement Allowance, Universal Credit and War Pensioners’ Compensation.

Certain retraining costs

Retraining courses are designed to help people prepare themselves for new jobs, whether it’s learning how to use software applications like Photoshop or Excel, or acquiring new knowledge about a specific industry. These courses are usually delivered online via a computer program called a virtual classroom.

Your employer pays for these courses, and you cannot claim back any money spent on them. However, certain retraining costs are exempt. This includes fees for the course; exams taken during or after the training; the cost of essential books used during the course; and the full cost for travel to attend the course.

Exempt expenses include fees for attending the course; fees for assessments taken during or after the class; the cost of essential materials used during the course; the cost for travel to attend; and any associated subsistence expenses. In addition, some employers provide free training. If you are self-employed, you can claim up to £2,500 per year for retraining activities.

You can find out what your employer covers here.

Employer-funded or employer-reimbursed training

Employers could claim deductions for providing training to their employees. However, under the new rules, employers cannot make claims for reimbursement of training costs. Instead, they must now pay the full cost of the training themselves.

In addition, the government has exempted all forms of training from taxation. This includes training that is paid for by the employer, or reimbursed by the employer. If an employer provides training to their employees, it will be exempt from taxation regardless of the type of training.

If you are unsure about how the new rules apply to your organisation, contact us today. We’ll help you understand what changes might impact your organisation and what steps you can take to minimise any financial impact.

Long service awards

There are two main ways to award long service awards: cash and shares.

Cash awards are typically given to employees who have been with the company for a number of years. They’re normally presented once per year.

Shares awards are given to employees who’ve worked for the company for a significant amount of time. Shares awards are generally given every three months.

Suggestion schemes

Employees are often encouraged to make suggestions about how things could be improved within their workplace. These suggestions might include ways to increase productivity, reduce costs, or even suggest improvements to processes and procedures. This type of idea sharing is known as a suggestion scheme.

Tax rules apply to employees who win prizes such as cash, vouchers, or goods. They also apply to those who receive free meals or drinks. If you win a prize, it’s important to keep track of what you win and where you spend it. You may be able to claim some of your expenses against your taxable income.

The amount of money you earn depends on the number of people who take part in the scheme and the value of the prizes you win. Your employer pays National Insurance contributions on your earnings, and you pay Income Tax on any profits you make.

If you win a prize worth over £5,000, you’ll need to register your interest with HM Revenue & Customs.

Encouragement awards

An encouragement award is a tax-free gift if the value does NOT exceed £25.

A Taxable Gift is any present worth more than £10. If you give someone a gift and it costs you less than £10, you must pay income tax on the difference. You cannot claim the cost of the gift against your income tax bill.

If you want to give someone a gift worth more than £10, there are several options. You could buy a voucher for a taxi ride or a meal out, or you could give cash.

You could also arrange to meet up with the recipient and spend some quality time together. This is called a “tax-free gift”.

Financial benefit awards

The Government Accountability Office (GAO), the investigative arm of Congress, published a report about how the federal government spends money. In it, GAO found that financial benefit awards are given out for suggestions which improve efficiency and effectiveness. These ideas include things like improving employee training programs, increasing productivity, reducing costs, etc.

There are additional conditions which apply to these awards. For example, the award must come from within the agency where the suggestion was submitted; the person submitting the idea cannot receive compensation for it; and there must be evidence that the idea actually improved efficiency or effectiveness.

Awards are only made after a final decision to implement the idea, according to the GAO. This means that agencies do not make decisions based on ideas alone. They look into whether the idea works and makes sense before awarding funds.

Goodwill entertainment

The term goodwill entertainment refers to entertainment activities that are part of the terms and condition of employment or any entertainment activity that is required to be give to all employees or members in the relevant group.

Examples of goodwill entertainment include:

• Birthday celebrations

• Christmas parties

• Sports events

• Company picnics

• Holiday parties

Car, motorcycle and bicycle parking

The European Commission published a proposal for a regulation on car, motorcycle and bicycle parking spaces. The aim of the proposal is to ensure that parking spaces are available for cars, motorcycles and bicycles in urban areas. In particular, it aims to improve accessibility to public transport, reduce congestion and pollution, and increase safety.

According to the proposal, local authorities will be required to provide sufficient parking spaces for motor vehicles. They will be obliged to make sure that there is enough space for both drivers and passengers, including disabled people. Local authorities will also have to take into account the needs of cyclists and pedestrians.

In addition, the proposal states that local authorities will have to provide a range of options for car owners to park their vehicle at short notice, such as free parking spaces outside shopping centres and supermarkets.

The proposed legislation will apply to all EU Member States. However, national rules will still apply where local authorities do not comply with the requirements set out in the proposal.

Certain gifts

Gifts must be given by an Individual who is not your Employer or someone connected with your Employer.

A gift voucher/token is not Taxable.

A gift cannot be taxed if cost less than £250.00.

Trivial Benefits are gifts given to Everyone in the Company.

Gifts Between Friends & Family Members are Exempt if Given in Connection With Family, Domestic or Personal Relations.

A Gift Must Be Given To Someone Other Than Your Spouse Or Dependent Children To Qualify For Tax Exemption.

Work to home travel provided when you work late or when sharing arrangements are disrupted

This benefit applies to all employees in Australia who work long hours. Employees must be working long shifts (at least eight hours), or working overtime, to qualify for this benefit, and it can apply even if you don’t spend every day at work. If you’re travelling away from home overnight because of shared accommodation arrangements being disrupted, you can still receive this benefit. You’ll need to provide evidence that you worked long hours during the period of disruption.

Frequently Asked Questions

Do you pay National Insurance (NI) or taxes?

If you don’t earn enough money to qualify for state pension credit, you might still get some NI credits off your income tax bill. But you won’t always. What do you need to know about paying NI and getting it back?

You’ll probably pay less tax if you are employed, rather than self-employed. If you are earning £50,000 or more a year, you could save up to £1,500 a year on your taxes.

Your employer pays most of the NI contributions, and you get reimbursed later. This is called ’employer NIC’. Your employer must tell HM Revenue & Customs how much they’ve contributed towards your NI contribution. They can deduct this amount from what you owe in income tax.

However, there are limits to how much your employer can claim back from you. For instance, you cannot take back more than half of the total amount that your employer has paid towards your NI contribution. And you cannot take back more NI contributions than you have already earned.

If you are self-employed, you generally have to make payments yourself. However, there are exceptions. You might be able to claim NI contributions back if you are a sole trader, a partnership, a limited liability partnership, a charity or a trust.

There are different rules for people who run businesses out of their homes. These include sole traders, partnerships, limited companies and trusts.

You can claim back tax relief on your NI contributions if you meet certain criteria. To find out whether you qualify, contact HMRC.

Is an Employee’s Lifetime Achievement Award Taxable?

Yes, An employee’s lifetime achievement award is considered income under UK tax law. If you have received an award for your work at a company, then you should consider whether you need to pay taxes on it. You may not owe any taxes if you qualify for certain exemptions.