Every business wants motivated, healthy and happy staff. But what if you could reward them and save on tax? Well you can, if you understand how to unlock tax-free recreational benefits.
Tax-Free Recreational Benefits: What You Need to Know
Whilst we've discussed the various tax-free benefits-in-kind available previously and this is another tax-free perk potentially available to you and your employees. What's more, it can be a good method of encouraging your employees to switch to a more office based working pattern.
HMRC will permit you to provide sporting or recreational facilities tax-free. Although, only if specific conditions are met. These benefits can even extend to employees’ family or household members. The main conditions are as follows:
Key points
To qualify, the facilities must be open to all your employees - not just a select few. If the access is restricted (e.g. only senior staff), you’ll lose the tax break. Furthermore, even if you share facilities with another employer, all employees must be able to use them equally.
The general public may use the facility although only on a very restricted basis. In practical terms this will be those living in the immediate vicinity. Therefore employees of most sports clubs or gyms are unlikely to meet this condition for tax-free recreational benefits.
Tax-Free Recreational benefits - Exclusions
Whilst there's a degree of flexibility in claim this tax-free perk, the following will definitely qualify for tax relief:
Tax planning points
This exemption will not allow you to provide membership cards for the local gym and sports club to your employees. However it does permit you to rent or lay on your own facilities. Additionally you can join with other businesses to set up facilities for your employees to share.
In practice only large businesses will be able to finance in-house gyms. However you could provide cycling or rowing machines for a lunchtime keep-fit session is a valuable benefit.
What's more, if your have the space available, you could can rely on this exemption to provide more organised activities. For example, a lunchtime fitness or yoga sessions. Additionally, if you install showers and changing facilities these will not be taxable if used in conjunction with your recreational facilities.
In fact, you can also rent premises, including sports halls, pitches or courts for use for tennis or football. Plus the benefit covers non-cash vouchers given to your employees to cover the use of any facilities provided. This allows you to issue the equivalent of membership cards for the use of facilities.
VAT position on Tax-Free Recreational Benefits
VAT recovery can be problematic. If staff perks are used for non-business purposes, VAT may become repayable. As a result, you’ll usually end up repaying the same amount you claimed – not worth the hassle.
Therefore its best to avoid any VAT issues by not claiming VAT on staff recreational perks. Although HMRC's guidance does provide some insight so review your setup carefully and
Summary
It’s easier than you think to unlock tax-free employee recreational benefits.. Whether you're offering yoga in the boardroom or setting up a mini-gym, stay within the rules. That way, both your staff and your finances will thank you.
For more useful information, check out our Ebooks here
And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].
Alternatively, please feel free to complete our Business Questionnaire here.