Employee wellbeing benefits and reporting

Since March 2020, when COVID-19 hit the workplace in the UK, many employees have been working from home full time or at least spending a larger proportion of their time working from home. We have seen many instances of employers considering how they provide support to their employee’s wellbeing and ensure colleagues remain in constant communication.

These factors are likely to continue after the impact of COVID-19 has ceased, as workforces in the UK move to a hybrid model of office and home-based working. To this end, employers should be aware of their reporting requirements when it comes to supporting their employees.

We are going to touch on two areas that are within the scope of employee wellbeing.

Staff entertainment

Where an employer provides parties and/or functions to employees and the annual exemption is exceeded, the value attributable to the relevant employees is considered to be a taxable benefit. This value should either be included on the individual’s P11D, upon which they pay income tax, or included through a PAYE Settlement Agreement (PSA), whereby the employer pays the income tax on the employees behalf.

S.264 ITEPA 2003 sets out the tax law covering staff entertainment. While the legislation is the starting point for any review, we must also consider additional commentary and general practices to understand how this is applied.

1. “This section applies to an annual party, or other similar functions provided for employees.
2. Where in the tax year only one annual party or annual function is provided for employees no liability to income tax arises where the cost per head of the party/function is lower than £150 per head.
3. Where in the tax year more than one function is provided all functions/parties will be exempt where the aggregated cost per head is lower than £150.
4. For the purposes of this section the cost per head of a party or function is the total cost of providing:
   a. The party or function,
   b. Any travel or accommodation incidentally provided for persons attending (whether or not they are employees), and
   c. Any VAT incurred on all costs.”

Employees who are attending events are unlikely to see this as part of their remuneration package, as such where a benefit is provided, should they receive a P11D showing the benefit value, which will be subject to income tax, they could be less motivated to attend a future event. The solution is to agree a PSA with HMRC to report such benefits.

Employee gifts

Trivial benefits, where conditions are met, are not considered taxable benefits and therefore are not reportable to HMRC. The conditions are:

• it cost the employer £50 or less to provide
• it isn’t cash or a cash voucher
• it isn’t a reward for the employee’s work or performance
• it isn’t in the terms of the employee’s contract.

If the ‘gift’ does not meet these conditions then the ‘reward’ will be considered taxable and therefore reportable on form P11D. Once again, should you not wish the employee to be taxed on this benefit, then you are likely to be able to agree the inclusion of these benefits on a PSA.

Should you wish to explore the operation and mechanics of a PSA, please contact Tom Boniface to see how one can benefit you.