Loans For A Purpose That Attracts Tax Relief In Full
An interest-free or low-interest loan made to you by reason of your employment, provided that any interest which is payable on the loan, or would be payable if the loan were interest bearing, attracts tax relief in full. Loans which attract tax relief include:
- qualifying loans see the note for box 5 of the Other tax reliefs section on page Ai 5 of the Self Assessment additional information pages
- loans on which any interest is deductible in computing the profits of a UK trade, profession or vocation or property letting business
If an interest-free or low-interest loan attracts only partial tax relief on the interest for example, a loan to buy a car you use to perform your duties it is not exempt from tax. Enter the cash equivalent of the loan in box 15 in the Employment page and claim any relief due in box 5 of the Other tax reliefs section on page Ai 2 of the Self Assessment additional information pages pages, or in computing the profits of the trade, etc in question.
Travelling From Offshore Rigs To The Mainland
Travelling facilities provided between the mainland and offshore oil or gas rigs or platforms. Where the timing of transport between the mainland and the rig make it necessary for employees to take overnight accommodation near the mainland departure point, subsistence expenses borne on behalf of or reimbursed to employees working on offshore oil or gas rigs or platforms.
Applying The Family Stock Attribution Rules
Under the family stock attribution rules, a person is considered to own the stock owned by that persons spouse, children, grandchildren, and parents , via Sec. 1372). Stock constructively owned by one family member cannot be reattributed to a second family member when applying the family stock attribution rules to that second family member ).
Example:W owns 100% of the stock of S, Inc., an S corporation.W retired a few years ago and promoted his son P to president and CEO ofS. The corporation covers all its employees, includingP, with group medical insurance. The current-year cost of the premiums forP is $3,000.
SinceP’s father owns 100% of the stock of S,P is deemed to own all the stock for purposes of the 2% test. According to Rev. Rul. 91-26, the corporation treats the insurance provided toP as compensation.P’s taxable income is increased by $3,000, while the corporate deduction passes through to W, who owns 100% of the stock. However, P may be able to claim an above-the-line deduction for the medical insurance premiums under Sec. 162.
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Airline Passes For Employees And Retirees Of An Airline Company
If you provide standby airline passes to a current airline employee for their personal travel, there is no taxable benefit for the employee.
If you provide space-confirmed airline passes to a current airline employee for personal travel, the passes are a taxable benefit. The value of the benefit to be included in the employees income is the fair market value of the pass , less any amount paid by the employee.
If you provide standby or space-confirmed airline passes to a retired airline employee for their personal travel, there is no taxable benefit for the retired employee.
What Is Fica Tax
The Federal Insurance Contribution Act tax is a federal payroll tax paid by employees and their employers that consists of a Social Security tax and Medicare tax. The FICA tax rate is applied to all taxable compensation, including salary, wages, tips, bonuses, commissions, and taxable fringe benefits.
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What Is A Cafeteria Plan
A cafeteria plan refers to a suite of fringe benefits offered by a company that allows employees to choose among them. Often these benefits will come out of pre-tax dollars and can include insurance plans, retirement benefits, and so on. The name cafeteria is used because it is akin to a menu of benefits that can be selected or passed over, such as at a cafeteria buffet.
Disabled Peoples Cost Of Travel Between Home And Work
Assistance with the cost of travelling between home and work, or to and from a place where work-related training is provided, including the reimbursement of travel expenses, given to people with a substantial and long term disability.
There is more information in our disabled people and carers section.
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Word Of Brilliance: Storefronts
Elizabeth: Okay, were back with Genes word of brilliance.
Gene: So the word, it actually is one word.
Elizabeth: Great.
Gene: But my word of brilliance today, I know, what a surprise, storefronts.
Elizabeth: Okay.
Gene: Amazon Storefronts.
Elizabeth: Okay.
Gene: Just recently Amazon has announced something called Amazon Storefronts, and Elizabeth, come on, ask me what exactly are Amazon Storefronts? Go ahead, ask me that.
Elizabeth: Can I make a guess or-
Gene: All right, go ahead.
Elizabeth: Am I just supposed to ask-
Gene: No, make a guess, go ahead.
Elizabeth: Im assuming that if you sell on Amazon, you can create your own storefront?
Gene: Kind of, not exactly.
Elizabeth: Okay.
Gene: Storefronts is really just a branding name for a special new site on Amazon.com which you can easily get to right from the home page specifically for small businesses.
Elizabeth: Really?
Gene: So Amazon, the statistics, I did a little bit of writing on this, the statistics are more than half of the items that are sold on Amazon.com are sold by small businesses. Theyre small merchants.
Elizabeth: Okay.
Elizabeth: Thats great.
Elizabeth: Thats an awesome word of brilliance.
Gene: That is my word of brilliance.
Elizabeth: When is this launching or its already launched?
Gene: Its already launched.
Elizabeth: Oh, okay.
Gene: Its out there and its available.
Elizabeth: All right, great, so this is for all of our retail and-
Elizabeth: Thats awesome.
Gene: Cool.
Board Lodging And Transportation Special Work Sites And Remote Work Locations
It is possible for an employee to work at a location that is both a special work site and a remote work location. However, the benefit can only be excluded from the employee’s income once.
Note
If the special work site is in a prescribed zone, see Board, lodging, and transportation at a special work site in a prescribed zone.
Special work sites
Generally, a special work site is an area where temporary duties are performed by an employee who keeps a self-contained domestic establishment at another location as their principal place of residence. Because of the distance between the two areas, the employee is not expected to return daily from the work site to their principal place of residence.
Note
A self-contained domestic establishment is a house, an apartment, or other similar place of residence where a person usually sleeps and eats. It is generally a living unit with restricted access that contains a kitchen, bathroom, and sleeping facilities. The SCDE must be separate from any other living unit in the same building. A room in a hotel, dormitory, boarding house, or bunkhouse is not ordinarily considered to be a SCDE.
Usually, the GST/HST and PST applies on meals and accommodations you provide to an employee. In certain cases, such as long-term residential accommodation of one month or more, no GST/HST and PST applies. Where the GST/HST and PST does apply, include it in the value of the benefit.
Board and lodging at a special work site
Note
Transportation
Transportation
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Recent Changes Have Removed The Tax Advantages Of Providing Some Employee Benefits Through Salary Sacrifice Schemes There Are However Other Options For Employers Looking To Incentivise Staff This Taxation Briefing Is An Update On Some Of The Tax
A note on salary sacrifice and optional remuneration
Since 6 April 2017 any benefits, other than employer pension contributions, childcare, cycle to work arrangements or qualifying low emission company cars will lose any tax advantages if provided under salary sacrifice or optional remuneration arrangements. For benefits already provided under salary sacrifice where the arrangement began before 6 April 2017, tax advantages will be lost at the earlier of the date on which any changes are made to the existing arrangements, or 6 April 2018. The tax positions outlined in the remainder of this briefing assumes that benefits are not provided via such arrangements, unless otherwise stated.
Employer pension contributions
Employer contributions to registered pension schemes play an important part in funding retirement provision for directors and employees. The introduction of pension auto-enrolment and the forthcoming increases in mandatory contribution rates will mean that such contributions will take on an even more significant role in the coming years.
If you do not currently operate a salary sacrifice arrangement with your pension scheme, this is very much worth considering further, particularly if you are making changes to your pension scheme to meet your obligations under auto-enrolment.
Childcare vouchers
Payments by the employer for household costs
Other tax-free benefits
Looking forward
How we can help you
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Accommodation Supplies And Services On Your Employers Business Premises
Accommodation, supplies and services for example, ordinary office accommodation, and equipment, phones, typists, messengers, stationery provided to you on your employers business premises and used by you in performing your duties, provided that if there is any occasional private use of the items by you it is not significant. During the coronavirus pandemic, HMRC also agree that various equipment and supplies provided by your employer to enable you to work at home are not taxable.
Employers can provide disabled employees with some equipment to help them to overcome their disability and enable them to work.
How To Calculate The Amount Of The Gst/hst You Are Considered To Have Collected
The amount of the GST/HST you are considered to have collected on a taxable benefit is based on a percentage of the value of the benefit for GST/HST purposes. The percentage rate you use depends on:
- the province or territory in which the employee ordinarily reported to work
- if you are a large business on December 31, 2021, for the purpose of the recapture of input tax credits for the provincial part of the HST
- if the benefit is an automobile operating expense benefit or some other type of benefit
Value of the benefit
The value of the benefit for GST/HST purposes is the total of the following two amounts:
- the amount reported on the T4 or T4A slip for the benefit
- if the taxable benefit is for a standby charge or the operating expense of an automobile, the amount, if any, that the employee or the employee’s relative reimbursed you for that benefit
Note
When an employee or an employee’s relative has reimbursed an amount equal to the entire taxable benefit for a standby charge or the operating expense of an automobile and, as a result, no benefit is reported on the T4 slip, the value of the benefit for GST/HST purposes is equal to the amount of the reimbursement.
Automobile operating expense benefits
- 11% for Prince Edward Island, or 10.2% if you are a large business on December 31, 2021, for the purposes of the recapture of input tax credits for the provincial part of the HST
- 11% for Nova Scotia, New Brunswick, and Newfoundland and Labrador
- 9% for Ontario
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The Value Behind Offering A Taxable Fringe Benefit
If you offer taxable fringe benefits to an employee, there is still considerable value in offering them. The cost to the employee for receiving a taxable benefit is considerably less than what it would cost the employee to pay out-of-pocket for it. For example, say you pay $1,000 toward an employee’s student loan debt. If the employee is in the 22 percent tax bracket, this benefit costs the employee $220 in income taxes and $76.50 in FICA taxes, or a total of $296.50. If the employee wanted to pay the same $1,000 out-of-pocket, they would have to earn an additional $1,425 to come out the same.
Benefits That Are Exempt From Fica
Two of the most popular tax-exempt employee benefits health insurance and employer contributions to qualified retirement plans are not subject to FICA. But these aren’t the only benefits that can be offered free from FICA tax. Per the Internal Revenue Service , tax-deductible employee benefits include:
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Cellular Phone And Internet Services
If you provide your employee with a cell phone that you own, to help carry out their employment duties, the fair market value of the cell phone or device is not a taxable benefit.
However, if you reimburse your employee for the cost of their own cell phone , the FMV of the cell phone or device is considered a taxable benefit to the employee. This is the case even if the employee used, lost, or damaged the cell phone or device while carrying out their employment duties.
If you pay for, or reimburse the cost of an employees cell phone service plan, or Internet service at home to help carry out their employment duties, the portion used for employment purposes is not a taxable benefit.
If part of the use of the cell phone or Internet service is personal, you have to include the value of the personal use in your employee’s income as a taxable benefit. The value of the benefit is based on the FMV of the service, minus any amounts your employee reimburses you. You can only use your cost to calculate the value of the benefit if it reflects the FMV.
For cellular phone service only, we do not consider your employee’s personal use of the cellular phone service to be a taxable benefit if all of the following apply:
- the plan’s cost is reasonable
- the plan is a basic plan with a fixed cost
- your employee’s personal use of the service does not result in charges that are more than the basic plan cost
Note
Employer Contributions Into A Pension
Employer contributions to an employee’s pension scheme are not taxable on the employee provided they are within certain limits. You can read about the annual allowance and lifetime allowance on GOV.UK. Therefore if an employer pays into either the employee’s occupational pension scheme or into the employee’s personal pension scheme, no taxable benefit will normally arise. More information can be found on the page pensions and employees.
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Employee Benefits And Tax
Employee benefits can give rise to complicated tax and National Insurance considerations. You need to ensure that your payroll systems deal with employee benefits properly.
Various regulations have been introduced to reduce the tax advantages of employee benefits, ensuring that most of them are treated as taxable benefits. Even so, some employee benefits offer significant tax advantages.
Benefit For Motor Vehicles Not Defined As An Automobile
Even if the vehicle you provide to your employee is not included in the definition of Automobile, there is still a taxable benefit for the employee for their personal driving.
You have to reasonably estimate the fair market value of your employee’s personal use of your motor vehicle, including the GST/HST and PST. A reasonable estimate is considered to be the amount an employee would have had to pay in an arm’s length transaction for the use of comparable transportation. It includes items such as the cost of leasing a comparable vehicle and any other related operating costs. For more information, go to paragraph 23 in Interpretation Bulletin IT-63R, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer After 1992.
Although other methods of calculating the value of your employee’s taxable motor vehicle benefit are acceptable, the CRA generally accepts that the employment benefit arising from the employee’s personal use of the vehicle will be considered reasonable if it is calculated using the rates shown under Reasonable allowance rates.
Note
The standby charge and operating expense benefit calculations should not be used.
Depending on how your motor vehicle is used by your employee and the conditions that you place on the use of it, you may be able to calculate your employee’s taxable benefit using the Motor vehicle home at night policy.
Motor vehicle home at night policy
Note
Employees benefit
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Tuition And Training Costs
There is no taxable benefit to the employee if the principal beneficiary of the training is the employer. Training includes:
- Courses leading to a diploma, licence or certificate12 that will serve to maintain or upgrade the employer-related skills to the extent it is expected that the employee will return to his/her employment for a reasonable period of time after completion of the course
- Business-related training, even though not necessarily dealing directly with the employers business, e.g. stress management.
However, costs paid by the employer for courses taken primarily for the employees benefit are a taxable benefit for the employee, but expenses paid for an employees family member to continue their studies may benefit from a generous tax treatment .
12 In Quebec, the training does not have to lead to obtaining a diploma or a licence.
Private Health Services Planbenefits
Private health services plan payments made on behalf of employees and their dependents are nottaxable to the employees, and there are no CPP or EI premiums charged on thesepayments.
If employees pay a portion of the PHSP premiums, this qualifies as a medical expense for purposes of the medical expensetax credit.
See the private health services plans article on the Business page.
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