Publications that covered this story include: the Mirror, CityAM and Personnel Today on 22 July 2019.
- The tax complexities and costs of company cars drive employers away
- The value of loans-to-employees falls to nine year low
The number of employees receiving major job perks has fallen to a 12-year low*, as corporate cost cutting and increasing taxes on these perks make them less attractive for businesses to provide, our research shows.
The total number of people receiving taxable job perks (benefits-in-kind) from their employer, such as company cars, private medical insurance and accommodation for staff dropped 600,000 in the last year to 3.6 million in the last year (see graph below).
The decline may also be partly driven by the increasingly challenging economic environment businesses face, forcing them to reduce costs. Employee perks can often be the first to be cut. Company cars for example – one of the most common perks, which have suffered from an ever-increasing tax burden – saw a decline of 5% last year to 890,000 in 2017/18 from 940,000 2016/17.
The complexity of the tax system on perks has also made them less popular amongst employees. Confusion over issues such as what is and isn’t exempt from tax may have led businesses, especially SMEs, to scrap employee perks altogether.
Neela Chauhan, personal tax partner at our London office, says: “HMRC have had a tendency to tax every aspect of job perks to a point where they have been falling out of fashion.”
“That is a real shame as these perks can act not just as an important tool in retaining staff and lowering staff turnover, but they can also encourage greater staff performance.”
“In tougher economic times the cost of the job perk, its tax charge, NI and the paperwork on top of that – is just too much for some employers.”
Value of loans from businesses to employees falls 17% in a year
Another employee benefit that has declined in popularity is loans from businesses to their employees and directors, which fell to a nine-year of a taxable value of £150 million last year, down 17% from £180 million in 2016/17.
The decline is likely to be the result of increased tax on loans made to director loans, one of the more commonly used forms of loans-to-employees. In 2016 the Government increased the tax on director loans form rate from 25% to 32.5%.
However, loans from businesses to directors can be beneficial for the business. The loans have a set repayment date, which means the money is returned to the business and can be reinvested. The alternative – of paying the money to a director through a dividend or through payroll – is less likely to lead to the money returning to the business for reinvestment.