Give employees a tax break for Christmas

There is no excuse for Scrooge-like bosses this Christmas as there are plenty of ways to award staff a bonus ñ and many wonít cost the business a penny says tax expert Roy Maugham at accountants UHY Hacker Young

Mobile phones
Employers can provide a phone for an employee and pay the bills. The cost of the phone and the bills are then taken out of the employeeís wages. Because these payments are taken from gross earnings, before deductions - tax and NI bills are cut for the worker and the boss saves on NI, or passes the saving on as a pay rise.

The phone doesnít have to be used for work. The workerís family can also benefit as the tax break lets that person have two phones and a three more for family members. The money saved depends on big the phone bills are.

High earners taking five phones could save almost 1,000 a year. Theyíll save at least 33 % off the whole package and anyone earning 31,000 or more saves 41%

Laptops
Bosses can provide people with computer equipment, upto the value of 2,500. (lease costs must be no more than 500 a year) Employers usually lease - rather than buy - the equipment from a supplier running a Government backed Home Computing Initiative scheme, and then leases it on to the employee at no cost to the employer.

The employer then deducts the cost of the lease from the employeeís salary. The employee pays no tax or NI on these repayments. The employer still owns the machine but they can sell it for as little as 50 to the worker who then bags a great deal.

Childcare
Childcare vouchers are free of NI for both employer and employee. However, from 5 April the vouchers will additionally be free of tax, although the value will be capped at 50 a week. This tax break will make a huge difference to the value of the vouchers, especially for higher-rate taxpayers.

On yer bike
The Cycle to Work Initiative saves employees 40-50 % off the cost of bicycles and accessories. The company should buy the bike and lease it to the employee. At the end of the lease period the bike can be bought for the price if a monthís lease.

Free meals
Companies can also offer free meals and drinks to employees who cycle to work. If the meals are provided on a specially designated ëcycle-to-work dayí, they can be a nice tax-free incentive to employees.

Loans
Season-ticket loans to cover the cost of public transport are another benefit. This is tax-free under 5,000 - and the loan can be used for other purposes as long as company policy allows.

Financial advice
Changes to the Financial Services Authority regulations mean employers can offer financial information and advice up to a value of 150 per person tax-free for the employee.

Time to party!
The VAT-inclusive cost of an annual staff party can now be tax-free up to 150 per employee. Employees receiving gifts from suppliers at Christmas not be taxed unless the VAT-inclusive value of the gift exceeds 250.

Making sure staff are rewarded with tax efficient perks and benefits is an important way to minimise tax liability and motivate employees.

Roy Maugham is tax partner at national accountants UHY Hacker Young

Details are contained in the Inland Revenue Booklet 480, entitled Expenses and Benefits.