New rules mean mobile employees and their employers can make significant business savings
A rolling stone may gather no moss - but thankfully your mobile employees can gather more tax relief on their travels than you might expect. And the even better news is that this provides an excellent opportunity to generate significant savings for both employees and the business itself.
Although the rules for tax relief for business travel are widely understood, there is less awareness of those relating to subsistence expenditure – the money spent on food, drink and snacks during the day by your mobile or site-based employees. If the relief is not claimed, the money stays with the taxman, which in today’s financial climate is a waste companies can ill afford.
If your employees are considered mobile or site-based for tax purposes, they can claim the tax relief for subsistence expenses through their tax returns, but the downside is that they need to keep all receipts and enter into individual agreements with HM Revenue & Customs - a task which stops most from claiming.
But if the business instead agrees a scale-rate payment with HMRC in respect of such employee expenditure, and introduces it in conjunction with salary sacrifice arrangements, significant savings of tax and National Insurance are available.
The devil is in the detail with these arrangements but if is possible, for every 1,000 mobile employees, to generate an annual savings pool of between £500,000 and £1,000,000 - a pool which can be shared between the business and its employees.
The idea is scalable, so providing you have at least, say 200 such employees, it is still likely to be worthwhile, particularly at a time of so much pressure on people costs.
Michael Nagle is a director, Human Resource Services at PricewaterhouseCoopers
The definition of mobile
The rules for determining mobility for tax purposes can be complex. But as a rule of thumb, if you have itinerant workers with no main place of work or site-based employees who work on a succession of different sites which are not all within a five mile radius, they could qualify – provided no single project has an expected duration of more than two years.
It is important to agree matters with HMRC in this respect so that the arrangements are robust going.
Proposed HMRC changes from 6 April 2009 introduce ‘benchmark rates’, which remove a cumbersome hurdle to implementing such arrangements. So there has never been a better time to take advantage of the tax relief and to increase net pay while reducing payroll costs.