We are about to offer a job which is semi-remote (ie, 3 days in office, two from home each week). The person is located far enough away that he could travel but the costs are quite high. He would be travelling by train - are we allowed to buy him a season pass or is that a benefit in kind? Would it be better (ie simpler) just to increase his pay by an amount to cover the costs?
both will be taxable at the same rate from his perspective
IMO it is better for the employee if you gave cash (ie bump in salary) so that he has the flexibility to choose the method of transport.
If you declare his home as his base work location, then there is no BIK if you pay/he expenses his travel costs to the office.
ben, does HMRC get a bit funny if there is travel from the base work location to the office every day?
I imagine they would, but he's not doing it every day is he?
No he's not - initially 3 in the office & 2 at home, changing to 2 office & 3 at home after a trail period.
I imagine they would, but he's not doing it every day is he?
Sorry, had my blinkers on when I read the OP 😳
Ignore me!
what they say just pay travel as expenses
[i]ben, does HMRC get a bit funny if there is travel from the base work location to the office every day? [/i]
But tbh by the time you take out holidays and the like they'll be at less than 50%, so make their base at home and any travel is expensed. And worse-case it'd only be BIK after the first two years.
I'd clarify with your accountant though.
[i]are we allowed to buy him a season pass[/i]
probably wouldn't make (financial) sense unless they are travelling more than 3 days a week
Increase the salary. That way it will count towards pension contributions too.
Would it be better (ie simpler) just to increase his pay by an amount to cover the costs?
As an employee I'd be over the moon if you did this for me, bearing in mind that load of other benefits, e.g. pension contributions, are based on salary. As an employer I'd be inclined to go down the route of giving a "car allowance" as this is really just a way of giving a salary increase without incurring those additional costs.
Edit: 43 seconds. Seriously!
[i]Increase the salary. That way it will count towards pension contributions too. [/i]
and after you've added NI to this plus paid them enough to pay for expenses with net pay, probably doubled the cost (to the employer) as well...
spot the employees vs the employers 😯
Well, he did ask.... 😆
BIK subject to income tax (employee) and Class 1a NIC (employer)
Salary income tax (employee) and NIC (both employers and employee)
Salary does cost more to employee as they are suffer NIC too. The employer would also have higher salary costs due to holiday pay (less Corp tax) too.
You might be able to increase the salary in other ways without the knockon pension, NI contribution increase. My wife gets a car allowance as an additional payment. She isn't obliged to spend it on a car. Doesn't increase pension payments or NI if I understand.
I get my travel expenses redeemed as expenses so have to pay them first and then claim them back.
No BIK on that or tax.
All auditable in the future as the office have receipts and copies of the signed claim form etc.
Whilst very generous of you I don't get why you'd pay an employee's expenses to travel to work?
Whilst very generous of you I don't get why you'd pay an employee's expenses to travel to work?
Because otherwise they might not take the role?
If you're offering a competitive salary with high travel costs, the net benefit to the employee is no longer competitive.
I get my travel expenses redeemed as expenses so have to pay them first and then claim them back.No BIK on that or tax.
All auditable in the future as the office have receipts and copies of the signed claim form etc.
Only on "business" travel though? Not home to office?
Home to office is generally taxable. I get my mileage paid from home to work (taxable), but all other travel expenses are repaid without being subject to tax.
[i]You might be able to increase the salary in other ways without the knockon pension, NI contribution increase. My wife gets a car allowance as an additional payment. She isn't obliged to spend it on a car. Doesn't increase pension payments or NI if I understand. [/i]
There will be NI on it, as it's basically cash, just not salary - both for the employer and employee.
IANAL, but from my understanding the HMRC won’t like the idea of paying travel expenses unless it can be shown that the employee has to live in his current location due to the role. i.e. there doesn’t appear to be any functional reason why the role has to be performed from the employees home, so he is doing so by choice, going into the office will be classed as ‘normal commuting’ so he can't claim expenses.
[url= http://www.hmrc.gov.uk/manuals/eimanual/EIM32374.htm ]This ruling seems to cover a similar situation[/url]
Because otherwise they might not take the role?
No sorry still don't get it.
A en employer cannot pay for travel to the "normal place of work" it's my view 3 days in the office and 2 and home makes the office the "normal" place of work and I'd certainly expect HMRC to query your proposed payment. I know friends who work from home and visit client sites 3 days a week but as this aren't long term or employer offices they can claim travel as a business expense. Many companies offer interest free season ticket loans but as he's only taking the train 3 days a week I'd guess 3 daily tickets will be cheaper than a season ticket.
Curiously this is almost identical to my new employment situation... I live in Bath, the job's in London. They have bought me season ticket for this quarter, even though I mostly travel once a week, staying over in London while I'm there. The fact I will sometimes come in twice a week just about makes the season ticket worth it, and the convenience factor is great, not having to buy individual tickets each time or debate about whether to take peak or non-peak services...
You may well ask why they agreed to this - as it happened I used to work with/for a consultant who is now working with the employer, who headhunted me as I had the exact combination of experience in different areas that they needed and was available right away. They were looking for a London-based employee, I was looking for a Bath-based job, but the advantages were sufficient for both sides to come to an agreement. I imagine something similar has happened in the OPs case.
In my case, the ticket's being paid for as (additional) salary - it being a small business, they haven't hit their auto-enrolment staging date yet, the pension implications haven't come up yet. Will be interested to see how that is factored in (if I last that long).
No sorry still don't get it.
OK, so you have identified a guy who would be great for your company, you really want him, the only problem is it will cost him £6k per year for him to travel to where you need him, a remote location.
£50k is the going rate for his position, which you offer him, but he then realises that it will cost him £5k per year to actually get to work...which is like taking a £40k job.
So you try to find the most tax efficient way for both parties to make the role as attractive as possible, by picking up the costs of him getting to the remote location you need him to work in.
There's a 24 month rule as far as HMRC are concerned for expenses to a "temporary place of work".
I apply this as a freelance contractor with my own Ltd company. I can claim as employee off MyCo for up to 24 months with one client.
Benefit to the employee however is they can claim 45p per mile tax free up to 10,000 miles for car journeys, 25p after that. There's even an allowance for cycling to work I believe 😀
This isn't declared on the P11D if within the limits, so it's not a BIK to them and doesn't affect tax code. They can claim more of course but that would have to be declared.
The employer will need milageage logs kept as a record. Usually the employee will submit mileage claims with this information.
Train travel etc can also be claimed. You just get the ticket price back, though there's still tax benefits there. Car journeys are more profitable for the employee depending how efficient and the service needs of their car. The amount claimable is way more than cost of petrol, but is supposed to cover wear & tear.
If you up the salary instead then the employee is paying NI and income tax on that, and the employer is paying NI.
Doing it as expenses then you're lowering your Corp Tax bill.
After 24 months though... it ends. That place of work becomes permanent. Employee can't generally claim for travel for a permanent place of work.
If the travel is on and off, there are still rules that say it's permanent. There's a 40% rule I think. 40% of the time spent at that place.
Oh and there's also company car options. Not really looked into that.
And another thought is relocation costs. Not looked into that either, but I assume employer and employee gets benefits there for a period of relocation which possibly could include buying a season ticket for that period. Might require that they are looking for a house nearer to the office during that time though.
Whilst very generous of you I don't get why you'd pay an employee's expenses to travel to work?
We are offering an enhanced package due to the distance he needs to travel and want to make a distinction between basic salary and the traveling costs so others at the same level don't think they are being paid less.
A en employer cannot pay for travel to the "normal place of work" it's my view 3 days in the office and 2 and home makes the office the "normal" place of work and I'd certainly expect HMRC to query your proposed payment
That's my understanding also. It was clamped down a couple of years back (whether that was just where I work or nationally I'm not sure), you can only claim commuting travel expenses if you're travelling somewhere other than your regular place of work, and three days in the office would constitute a regular place of work.
Is it viable to have them come in two days a week instead of three? That'd qualify them as a home worker then, AFAIK. (I Am Not In HR.)
Only on "business" travel though? Not home to office?
I work from home in the Midlands and the office is in Scotland. If I travel to the office I'm still on expenses.
Admittedly I only travel there once a month normally but my normal place of work or 'office' is my home.
We are offering an enhanced package due to the distance he needs to travel and want to make a distinction between basic salary and the traveling costs so others at the same level don't think they are being paid less.
I have to say, they will think this regardless. Company I used to work for made a big deal out of people living locally but then allowed some to relocate away and paid their expenses to the office. Didn't go down well amongst those who couldn't just choose where they fancied living for whatever reason. I'd keep every employees specific arrangements very quiet beyond a 'level' or grade.
remember that it's possible for the employee can have more than one regular place of work - in which case travel expenses would not be payable for either.
http://www.hmrc.gov.uk/manuals/eimanual/EIM32140.htm
However it might be possible that the purpose of the trip to the office was specific, like a twice weekly meeting or training session, which might give you more leeway.
After 24 months though... it ends.
Hmm, IMO if it is expected that a place of work will be over 24 months then tax can't be claimed back even before the 24 months is up. I'm a consultant with a London office and I could end up working at the same client location for over 24 months which will cause me problems - so my plan is to try to switch to a different project at that point.
There's other complications with the 24 month rule when it comes to contract lengths. I'm a bit vague in that area and think I need to check with my accountant, who says this about the rule: http://www.sjdaccountancy.com/contractor-expenses-faqs#24month
Current client isn't a strict contract but just a purchase order for services. No length as such but is if I bill in days and the number of days runs out in a set period of time. Though I could take time off and then it will last longer.
But anyway, for contractors dealing with IR35 then it's getting messed up by new rules coming in next year I believe which places further limits. This isn't relevant to the OP though who's dealing with a permanent employee. In this case the tricky bit will be defining the permanent place of work vs temporary. Maybe there's some ruling with HMRC over remote working there, don't know.
I understand that bit Peterfile but I've just never heard of such a thing or indeed why you would do it.
I guess working in the public sector it's not something I'm going to see.
My work pick up all my travel expenses. It's done in a company cc also so no need to claim back. This includes travel to my normal office.
I'd choose this any day over a salary bump.
Technically my home office is local but I always work from another office 100miles away.