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How to reward achievement in a way that is tax efficient for you and doesn\u2019t burden the staff member<\/strong><\/p>\n <\/p>\n <\/p>\n At a recent nursery <\/p>\n <\/p>\n So what if the tax rules allow you to reward achievement in a way that is tax-efficient for the business and doesn\u2019t burden the staff member? <\/p>\n <\/p>\n <\/p>\n Here are some ideas to consider and discuss with your tax adviser.<\/p>\n <\/p>\n <\/p>\n <\/p>\n <\/p>\n You want to attract <\/p>\n <\/p>\n Although the <\/p>\n <\/p>\n <\/p>\n <\/p>\n If you take on an employee who lives more than <\/p>\n <\/p>\n This recognition may well set the tone for the <\/p>\n <\/p>\n <\/p>\n <\/p>\n You want to <\/p>\n <\/p>\n Did you know you can pay your staff <\/p>\n <\/p>\n <\/p>\n <\/p>\n Encouragement <\/p>\n <\/p>\n But before <\/p>\n <\/p>\n <\/p>\n <\/p>\n If you give your <\/p>\n <\/p>\n <\/p>\n <\/p>\n Normally payments made to staff for their outstanding services would <\/p>\n <\/p>\n <\/p>\n <\/p>\n Gifts you give to <\/p>\n <\/p>\n <\/p>\n <\/p>\n Employees want to feel valued and part of the business. According to <\/p>\n <\/p>\n <\/p>\n <\/p>\n Where an employer <\/p>\n <\/p>\n <\/p>\n <\/p>\n Let\u2019s say you have an employee who has <\/p>\n <\/p>\n <\/p>\n <\/p>\n If you or your employee decides to <\/p>\n <\/p>\n <\/p>\n <\/p>\n Staff recognition and reward isn\u2019t one size fit all. Besides money or incentives are not the only form of recognition. Why not try a simple, sincere and meaningful THANK YOU.<\/strong><\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.19.4″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.19.4″ _module_preset=”default” global_colors_info=”{}”][et_pb_button button_url=”https:\/\/calendly.com\/jonathanamponsah\/15minsclarity?month=2023-01″ button_text=”NEED HELP? 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According to Gallup’s research, only […]<\/p>\n","protected":false},"author":1,"featured_media":3013,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"\n How to reward achievement in a way that is tax efficient for you and doesn\u2019t burden the staff member<\/strong><\/p>\n\n\n\n At a recent nursery\nevent and speaking with a dozen of nursery owners, it was very clear that\nrecruitment, rewarding and retaining staff is the number one concern for\nchildcare businesses. According to Gallup's research, only one in three workers\nstrongly agree that they received recognition for doing good work. Further,\nemployees who do not feel adequately recognized are twice as likely to say\nthey'll quit in the next year.<\/p>\n\n\n\n So what if the tax rules allow you to reward achievement in a way that is tax-efficient for the business and doesn\u2019t burden the staff member? <\/p>\n\n\n\n Here are some ideas to consider and discuss with your tax adviser.<\/p>\n\n\n\n You want to attract\nthe best to come and work for you. You\u2019ve considered offering an initial\nfinancial incentive to achieve this. However, a payment to induce someone to\ntake up employment with you will count as salary payment with tax implications\nfor you and the employee. But what if the payment you make to the employee is\ndeemed as a compensation for the loss of some right they had which is not\nconnected with you? Here\u2019s what HMRC has published (ref EIM00710) \u201ca lump sum paid to an employee on becoming\na director\/employee of the company he worked for was held to be compensation\nfor the transfer to the company of the valuable business connections he had\nbuilt up for himself. It was not taxable as earnings\u201d<\/em> <\/p>\n\n\n\n Although the\npayment won\u2019t be taxed as salary, it will be taxed as capital gains tax. And\nbecause everyone is allowed \u00a312,000 tax free allowance, the staff member\nreceiving upto this amount will not be burdened by tax.<\/p>\n\n\n\n If you take on an employee who lives more than\na reasonable commuting distance from the nursery and they move closer work, did\nyou know you can pay them up to \u00a38,000 tax free amount to cover relocating\nexpenses like moving costs, stamp duty, legal fees and new furnishings?<\/p>\n\n\n\n This recognition may well set the tone for the\nnew relationship and there is no tax or national insurance to pay. Plus the\nbusiness gets to deduct this expenses against its income.<\/p>\n\n\n\n You want to\nrecognise a staff member for their outstanding contribution to your business\nand for going beyond their call of duty.<\/p>\n\n\n\n Did you know you can pay your staff\ntax free income for suggestions that benefit your business? Yes you can and\nactually there are two kinds of awards:<\/p>\n\n\n\n Encouragement\nawards are tax free up to \u00a325. But financial benefit awards are exempt up to\n\u00a35,000. That\u2019s right \u00a35,000. <\/p>\n\n\n\n But before\nyou go ahead and pay the staff member, please note that as will all tax reliefs\nand tax exemptions, there are conditions to meet. Refer to HMRC reference\nEIM06600. <\/p>\n\n\n\n If you give your\nemployees cash vouchers, the amounts would need to be put through the payroll\nand subject to tax and National Insurance. However non-cash vouchers up to \u00a350\nmay be exempt under the trivial benefit rules. Where the voucher exceeds \u00a350,\nyou will need to report these on a P11D form to HMRC. <\/p>\n\n\n\n Normally payments made to staff for their outstanding services would\ncount as salaries unless specific exemptions apply. Once such exemption is a\ngenuinely gratuitous payment that the employee was not expecting and had no\nright to receive. And a payment made merely to recognise their generous nature.\nThere must not be a regular pattern to these payments and do check with your\naccountant before proceeding. <\/p>\n\n\n\n Gifts you give to\nyour employees are normally exempt from tax and NI. However this exemption only\napplies if the gift is deemed to be trivial. For a gift to be considered a\ntrivial benefit, it must cost \u00a350 or less, and not be part of the employees\u2019\ncontract or a reward for performance. It must also not be a cash reward as HMRC\nwill tax this as earnings (payroll tax). So classic gifts including a bottle of\nwine or box of chocolates would be exempt from tax.<\/p>\n\n\n\n Employees want to feel valued and part of the business. According to\nGallup and the Harvard Business Review, employees want to work towards a\npurpose driven common goal. So if you want to follow the success of John Lewis\nin creating the ownership mentality, then there are tax efficient ways of doing\nthis. They are called Approved Share Option Schemes and something to discuss\nwith your accountants. <\/p>\n\n\n\n Where an employer\npays for the cost of staff medical insurance, the staff member will be taxed on\nthe value of the insurance as benefits in kind. However there is a specific\nexemption that allows the employer to pay for employees to have private medical\ncheck-ups without any tax implications on the employee. So this could be health\nscreening assessments, medical check-ups or eye tests.<\/p>\n\n\n\n Let\u2019s say you have an employee who has\nworked for you for a very long time. And it\u2019s time to move on. Did you know you\ncan give them a non-cash award of upto \u00a31,000 if certain conditions apply? Think\nabout the goodwill this will create among existing staff members. Search HMRC\u2019s\nsite for long service award for more details. <\/p>\n\n\n\n If you or your employee decides to\nlook for business opportunity or take your laptop with you while on holiday, no\nelement of this holiday costs can be claimed. However where the purpose of the\ntrip is for business with perks including sauna, round of golf, free dinner and\nthe likes, there will be no tax implications for you or the staff member. <\/p>\n\n\n\n Staff recognition and reward isn\u2019t one size fit all. Besides money or incentives are not the only form of recognition. Why not try a simple, sincere and meaningful THANK YOU.<\/strong><\/p>\n","_et_gb_content_width":"","footnotes":""},"categories":[1,66],"tags":[],"class_list":["post-3012","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-childcare"],"yoast_head":"\n
\nevent and speaking with a dozen of nursery owners, it was very clear that
\nrecruitment, rewarding and retaining staff is the number one concern for
\nchildcare businesses. According to Gallup’s research, only one in three workers
\nstrongly agree that they received recognition for doing good work. Further,
\nemployees who do not feel adequately recognized are twice as likely to say
\nthey’ll quit in the next year.<\/p>\n\n
\nthe best to come and work for you. You\u2019ve considered offering an initial
\nfinancial incentive to achieve this. However, a payment to induce someone to
\ntake up employment with you will count as salary payment with tax implications
\nfor you and the employee. But what if the payment you make to the employee is
\ndeemed as a compensation for the loss of some right they had which is not
\nconnected with you? Here\u2019s what HMRC has published (ref EIM00710) \u201ca lump sum paid to an employee on becoming
\na director\/employee of the company he worked for was held to be compensation
\nfor the transfer to the company of the valuable business connections he had
\nbuilt up for himself. It was not taxable as earnings\u201d<\/em> <\/p>\n
\npayment won\u2019t be taxed as salary, it will be taxed as capital gains tax. And
\nbecause everyone is allowed \u00a312,000 tax free allowance, the staff member
\nreceiving upto this amount will not be burdened by tax.<\/p>\n\n
\na reasonable commuting distance from the nursery and they move closer work, did
\nyou know you can pay them up to \u00a38,000 tax free amount to cover relocating
\nexpenses like moving costs, stamp duty, legal fees and new furnishings?<\/p>\n
\nnew relationship and there is no tax or national insurance to pay. Plus the
\nbusiness gets to deduct this expenses against its income.<\/p>\n\n
\nAward?<\/strong><\/li>\n<\/ul>\n
\nrecognise a staff member for their outstanding contribution to your business
\nand for going beyond their call of duty.<\/p>\n
\ntax free income for suggestions that benefit your business? Yes you can and
\nactually there are two kinds of awards:<\/p>\n\n
\nawards – for good suggestions, or to reward your employees for special effort<\/li>\n
\nawards – for suggestions that will save or make your business money<\/li>\n<\/ul>\n
\nawards are tax free up to \u00a325. But financial benefit awards are exempt up to
\n\u00a35,000. That\u2019s right \u00a35,000. <\/p>\n
\nyou go ahead and pay the staff member, please note that as will all tax reliefs
\nand tax exemptions, there are conditions to meet. Refer to HMRC reference
\nEIM06600. <\/p>\n\n
\nemployees cash vouchers, the amounts would need to be put through the payroll
\nand subject to tax and National Insurance. However non-cash vouchers up to \u00a350
\nmay be exempt under the trivial benefit rules. Where the voucher exceeds \u00a350,
\nyou will need to report these on a P11D form to HMRC. <\/p>\n\n
\nPayments <\/strong><\/li>\n<\/ul>\n
\ncount as salaries unless specific exemptions apply. Once such exemption is a
\ngenuinely gratuitous payment that the employee was not expecting and had no
\nright to receive. And a payment made merely to recognise their generous nature.
\nThere must not be a regular pattern to these payments and do check with your
\naccountant before proceeding. <\/p>\n\n
\nEmployees <\/strong><\/li>\n<\/ul>\n
\nyour employees are normally exempt from tax and NI. However this exemption only
\napplies if the gift is deemed to be trivial. For a gift to be considered a
\ntrivial benefit, it must cost \u00a350 or less, and not be part of the employees\u2019
\ncontract or a reward for performance. It must also not be a cash reward as HMRC
\nwill tax this as earnings (payroll tax). So classic gifts including a bottle of
\nwine or box of chocolates would be exempt from tax.<\/p>\n\n
\nGallup and the Harvard Business Review, employees want to work towards a
\npurpose driven common goal. So if you want to follow the success of John Lewis
\nin creating the ownership mentality, then there are tax efficient ways of doing
\nthis. They are called Approved Share Option Schemes and something to discuss
\nwith your accountants. <\/p>\n\n
\npays for the cost of staff medical insurance, the staff member will be taxed on
\nthe value of the insurance as benefits in kind. However there is a specific
\nexemption that allows the employer to pay for employees to have private medical
\ncheck-ups without any tax implications on the employee. So this could be health
\nscreening assessments, medical check-ups or eye tests.<\/p>\n\n
\nworked for you for a very long time. And it\u2019s time to move on. Did you know you
\ncan give them a non-cash award of upto \u00a31,000 if certain conditions apply? Think
\nabout the goodwill this will create among existing staff members. Search HMRC\u2019s
\nsite for long service award for more details. <\/p>\n\n
\nlook for business opportunity or take your laptop with you while on holiday, no
\nelement of this holiday costs can be claimed. However where the purpose of the
\ntrip is for business with perks including sauna, round of golf, free dinner and
\nthe likes, there will be no tax implications for you or the staff member. <\/p>\nAnd
\nFinally\u2026.Just Say Thank You and Mean It From Your Heart<\/strong><\/h2>\nABOUT THE AUTHOR<\/h3>\n
Jonathan Amponsah CTA FCCA is an
award-winning chartered tax adviser
and accountant who has advised
many clients over the last decade
on tax.<\/h4>\nHe has successfully defended clients
against HMRC at the tax tribunal.<\/h4>\nJonathan is the founder and CEO of
The Tax Guys.<\/h4>\nAnd\nFinally\u2026.Just Say Thank You and Mean It From Your Heart<\/strong><\/h2>\n\n\n\n