Let's look at some of the major changes that could be on the horizon for expenses and benefits after lockdown:
Employment tax rules are often late to the table in terms of allowing for tax exemptions for new situations. HMRC have, however, allowed employers to pay a home working allowance (increased to £6 per week since April 2020) to employees who are required to work from home.
Eligible employees can also potentially claim for tax relief where their employer does not provide this financial support.
Working from home expense policies
Equally, there are potential temporary relaxations for home office equipment being provided to staff, although businesses should watch out for what happens when employees leave. If ownership of employer-provided equipment is transferred to the employee, there is likely to be a tax charge.
However, where employees are reimbursed for equipment they have bought, no benefit charge arises on the reimbursement, even if the employer allows them to keep the equipment (on the basis that it is something that they already own).
Staff entertaining expenses
As thoughts moved to annual functions at the end of last year, HMRC also extended the rules, typically used for Christmas parties to allow the £150 exemption to be used for virtual events.
We also have the year-round trivial benefits exemption that potentially allows benefits that aren't a recognition for services or otherwise taxable elsewhere to be provided where the cost doesn't exceed £50 per recipient.
Employee travel expenses
While the reimbursement of travel costs between home and a permanent workplace are likely taxable in most cases, is there a case to be made to update HR contracts for genuine home workers, where the tax rules allow it? With the cost saving of having no commute, will businesses have to incentivise their employees to come to the workplace?
A company car is often seen as a perk for office-based workers or even a status symbol. However, for some, this has been resented as a cost parked outside the house, might we see a move towards car-club ownership or increased take up of electric vehicles, or even electric bikes?
There are currently significant benefit-in-kind savings available for electric vehicles and, in the case of electric bikes, the increase in the price cap under cycle-to-work schemes has brought more expensive models into reach.
New employee benefits
What about employee benefits? Employees may have avoided gyms during the past year, but instead, migrated to home or local workouts. With the increase in adoption of home-workout equipment, might we see corporate subscriptions to exercise apps?
Could tax-efficient, interest-free loans of up to £10,000 be offered to help employees to lease or buy expensive exercise equipment like a Peloton, potentially with a corporate discount? Could this extend to home technology, whether wireless ear phones, wifi boosters or printers?
What about other services? Meal plan subscriptions, coffee or tea deliveries or even cleaning services might be included?
Employee wellbeing and mental health
With the change in working locations and more of a focus on mental health, might we see more investment in online therapies and other forms of support?
Respondents planning to invest more in employee benefits
Respondents planning to invest the same amount in employee benefits
Respondents planning to invest less in employee benefits
Our Business Outlook Tracker found that 83% of UK mid-sized businesses are planning to invest more or the same in their employee wellbeing - such as providing financial, physical and emotional resilience services to support employee engagement and retention - over the next six months.
Taken together, there's potential for a well thought-out approach to expenses and benefits to follow a hybrid working model. There are also potential employment tax exemptions or benefits that can increase the attractiveness and reduce the cost to the employer.
A robust expense policy follows thoughtful planning and testing based on what your most-important asset, your people, need. This can help ensure employment tax risks and costs are sufficiently managed.
If you need help with exploring the tax implications of your approach to employee expenses and benefits, contact Jonathan Berger.