As inflationary increases cause the cost of living up, we're seeing a general squeeze on expenditure across the population and people are keeping things lean until it settles again. Limited companies aren't immune, so here are a few ideas to consider:
These are ad-hoc gifts from the company to its employees. As long as all of the below apply, you can give this tax-free gift to your employees:
- it costs you £50 or less to provide
- it isn't cash or a cash voucher
- it isn't a reward for their work or performance
- it isn't in the terms of their contract
If all of those apply, this is deemed a trivial benefit meaning you don't need to pay tax or National Insurance or let HMRC know. If a gift doesn't meet all of the above, you have to pay tax on the gift as a benefit in kind so it's essential to get it right from the start.
Directors of Limited companies are capped at £300 of trivial benefits annually, however, employees do not have a cap.
One example of a very useful Trivial Benefit right now would be a supermarket voucher for your employees. As long as it's a "non-cash voucher" (meaning only redeemable for goods or services, not cash) and the other points above apply, then it'll be tax-free for you and your employees.
I tend not to recommend the cycle-to-work scheme unless you've got loads of employees and need a proper scheme set up. Instead, for most small Limited companies, the benefit is in the fine print. Bicycles, and appropriate safety gear for them, qualify as Plant and Machinery, meaning they can be purchased and have the same tax deductions as a laptop for example. Unfortunately, though, it's not as simple as that. Normally, if a company provides a vehicle to an employee/director, there would be Benefit in Kind taxes. There are specific rules written on how to ensure you get income tax relief though (meaning no Benefit in Kind) - the following three conditions need to all be met:
- There must be no transfer of the asset to the individual - ie the company will continue to own it.
- The employee (or director) uses the cycle or equipment in question mainly for qualifying journeys - over 50% of the use of the bike needs to be to/from work or for work journeys.
- The bike, and safety equipment, need to be generally available to all employees.
It's worth noting too that as the company owns the bike, all relevant repair/service costs can be run through the company too.
It's inevitable that you run your business from home, whether or not you have an office space that you use as well. You might undertake bookkeeping from home, or pay bills, or prepare correspondence. All are part of running a business.
With this in mind, it's important to make sure you're claiming what you can as tax-deductible expenses. You have three options available:
- Simplified expenses - a £6 per week nominal charge to the Limited company which you can pay yourself tax-free (via your Directors Loan Account) for running the company from home.
- Calculated expenses - this is a proportion of appropriate home costs based on rooms used for business, and the amount of time the room is used for business. The company can only claim a portion of costs that are directly affected by the business running from home. For example, council tax and mortgage interest won't change, but electricity consumption and potentially water usage would.
- Contracted rent - this is a formal agreement between you and your Limited company to rent some space from you for the purposes of business use. It stipulates the rental value payable and space made available to the company. It's a tax-deductible cost for the company but is deemed as rental income for your personal income purposes.
A Limited company is able to provide it's employees with one mobile phone, as long as the contract for this is in the company name. They can also use it personally without a benefit in kind charge! Again, this also applies to directors.
If you want any more information about the above, get in touch and we can chat!