Tax-free recreation benefits

We've mentioned in a previous blog how your company might provide you with tax-free trivial benefitsThis time we're going to discuss when tax-free recreation benefits can be provided to directors and employees. 

Tax free recreation benefits

Tax-free recreation benefits - the main conditions

Your company can provide tax-free recreation benefits to its employees, or any member of their family and household. However certain conditions have to be met in order to qualify:

The primary conditions for tax-free recreation benefits are as follows:

  • The facilities are available generally to all employees of your business 
  • They are not available to the public generally
  • They are used wholly or mainly by persons who have a right to use them as employees. This does not necessarily mean they need to be employed by the same business

Tax-free recreation benefits - key points

You'll need to ensure that the recreational facility is open to all employees. The taxman states that if two employers are sharing facilities, though one only allows senior staff to use these then the conditions aren't met.

The general public can share the facilities though only at limited times. So this means that most sports clubs, gyms etc won't qualify.

Excluded tax-free recreation benefits

The rules state that tax-free recreation benefits will not apply to the following:

  • The use of (or an interest in) any mechanically propelled vehicle. This includes boats, aircraft and hovercraft. However if a dingy or yacht has no inboard or outboard motor it is potentially not caught by these rules. 
  • Holiday or other overnight accommodation.
  • Facilities, included or provided with holiday or other overnight accommodation. 
  • Facilities that are provided on premises that are used wholly or manly as a domestic dwelling 

Tax-free recreation benefits - planning points

This exemption won't allow you to hand out membership cards for the local gym and sports club. However you may be able to rent or lay on your own facilities or join with other businesses to set up facilities for all to use.

Unless you are large business you won't have the resources to construct your own gym. However you could provide a cycling or rowing machine as part of a lunchtime incentive to keep fit.

If you have space on your business premises you can provide more organised activities. For example lunchtime circuit training.  You could also rent premises for tennis or football nights. This could including sports halls or pitches or courts. 

One final point to mention is that if your business installs showers and changing facilities these will not be taxable if their use is in tandem with the recreational facilities.

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].

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