Payments to Staff – 15 Tax Free Options

It is difficult for businesses to retain staff and we are often asked for ways to remunerate them in a tax efficient manner. Detailed below are 15 various options:-

1. Working from Home

Where employees work for substantial periods outside the employer’s business premises in the course of the performance of the duties of their employment, an employer can cover certain costs on a tax free basis:
  • Equipment such as computers, printers, office furniture, telephone line and internet access provided to facilitate work in the employee’s home where personal use is incidental.
  • A contribution of up to €3.20 per day for light and heat expenses. The employee can also claim additional amounts on a vouched basis where actual costs incurred exceed this level.
  • Costs of business calls on home and personal mobile phone.

2. Sport Club Subscriptions

If the employer pays the subscription on behalf of the employee, the amount paid is declared as notional salary and the equivalent tax is deducted from the employee.  For example a golf club subscription costing €1,500 will in effect only cost the employee €750, assuming 50% income tax marginal rate applies. These can be made tax free where membership of the club is available to all employees.

3. Non-Cash Gift – Voucher or Benefit

The limit for giving a tax free voucher to an employee is €500 per annum. These are normally provided as vouchers and are tax free to the receiver.

4. Company Car or Pool Car

If private use is excluded, then the cost to the employee can be zero. Depending on the amount of business mileage, a company car even subjected to the top rate of BIK can be effective, especially accounting for the fact that the company pays all its running costs. Commercial vehicles and motor-bikes attract more favourable BIK rates.

5. Pension Contributions

Employers are required to provide employees with access to a pension scheme. Pension contributions can be made by an employer to either their employees’ PRSAs or to an occupational pension scheme. The employer contribution is fully tax deductible and is tax free for the employee, other than the USC applying where payments are made to a PRSA.

6. Medical Check-Up

Where the employee is required to undergo a medical check-up by the employer and the employer pays the costs there are no tax implications for the employee.

7. Cycle to Work Scheme

An employer can purchase a new bicycle and safety equipment on behalf of an employee, tax free, up to a value of €1,000, provided that the bicycle and equipment are mainly used for travel to and from work or for other work related journeys.

8. Travel Pass

The provision of a travel pass to enable an employee travel to work can be made tax free.

9. Mileage and Subsistence

Mileage expenses to cover the use of personal motor vehicles by employees for business use can be paid tax free where proper records are kept and rates paid do not exceed the civil service rates. Subsistence can also be paid to employees who are outside the office for more than 5 hours in the carrying on of their employment duties. Foreign business travel and subsistence can also be paid.

10. Sports and Recreational Facilities

These can be made available to employees’ tax free where the facilities are on the employer’s premises for the use of employees generally.

11. Long Service Award

Long service awards are not taxable where the award is for service of at least 20 years; the award is something tangible and does not cost in exceed €50 per year of service; and no similar award has been made to the employee within the previous 5 years. The treatment does not apply to awards made in cash or in the form of vouchers or bonds.

12. Free Magazines/Newspapers

Where these are provided by the employer and are generally related to the employer’s business, a taxable benefit does not arise.

13. Mobile Phones for Business Usage

Incidental private use is permitted without giving rise to a charge to tax. The provision of a home telephone to an employee for business use where private use is merely incidental is also tax free.

14. Examination Awards and Exam Fees

Awards made to an employee for passing exams or for acquiring qualifications bearing some relationship to the employee’s duties can be made tax free, once regarded as a reimbursement of expenses likely to have been incurred. Refunding of course and exam fees can be made tax free where the course is relevant to the employer’s business, leading to the acquisition of knowledge or skills necessary for the duties of the employment or to increase the effectiveness of their performance.

15. Professional Subscriptions or Membership Fees

These can be paid tax free where the subscription is required to carry on employment duties.

What questions do you have?

We are happy to help. Please post your comment below or call Paul Leonard, Partner at Cooney Carey, on 01 677 9000. Alternatively, send him an email: pleonard@cooneycarey.ie

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