Smarter Commuting - Aternative Commuting

This is the colective term used where an employer helps employees to get to and from work. However by simply providing such as by petrol cost contributions or season tickets, these types of benefits will normally be taxable. Conversely, with the managed introduction of a compliant Salary Sacrifice scheme, there is no benefit-in-kind tax or NICs to pay provided the employer offers:

or put into HMRC (HM Revenue & Customs) terminology...“Employers can offer their employees a free or low-interest season ticket loan up to £5,000 per year. There is no tax or NICs to pay provided the full amount of the loan is repaid to the employer and total loans outstanding do not exceed £5,000 (at any time)." - Nov 05 HM Revenue and Customs.

 

* Payment of tax using the P11D form can be made with the Inland Revenue to cover issues of the proportion of season ticket use that is for personal and  company use. For more information on how your company can benefit from tax breaks through Corporate Travel Plans you can visit HM Revenue and Customs at www.hmrc.gov.uk/green-transport/travel-plans.htm. If you are interested in setting up a green travel plan then visit www.dft.gov.uk/pgr/sustainable. This site includes a comprehensive pack to help you through the process.

Of course, you also get peace of mind knowing that your employees have a safe and reliable method of getting to and from work, and not one that is going to cost them the earth. It can act as a valuable added job benefit, aiding recruitment and staff retention as well as improved staff attendance and timekeeping.

A salary sacrifice happens when an employee gives up the right to receive part of their cash pay due under their contract of employment. A salary sacrifice is neither a deduction from salary nor is it a charge on salary, it is where the employee agrees to accept a lower amount of salary – usually in return for the employer’s agreement to provide some form of non-cash benefit (in this case the loan of cycle or cyclists’ safety equipment).

For a benefit such as a loaned cycle, where there is a specific tax exemption, the employee can receive the benefit in kind free of tax and Class 1A NICs instead of salary on which tax and Class 1 NICs would also have been fully payable. For example: if it is assumed that the employee is loaned equipment worth £500 over a period of eighteen months they could

sacrifice £6.41 per week from their gross salary. Net of tax and NICs this would be £4.29 for a basic rate taxpayer (22% income tax plus 11% NICs) and £3.78 for a higher rate tax payer (40% income tax plus 1% employee NICs). See section 6 for important considerations to communicate to your employees on salary sacrifice and section 10 for details on the role of HMRC. It is always advisable to have early discussions on the implementation of such schemes with your organisation's Tax advisors or directly with HMRC For fuller guidance on salary sacrifice you may wish to view the HMRC website

Where costs of loaning equipment to the employee are offset through a salary sacrifice arrangement, the employer will save Secondary Class 1 NICs (at up to 12.8%) on that part of the employee’s gross salary sacrificed. For example, if an employer was to loan a cycle worth £500 over eighteen months, the employee would sacrifice in total £500 of gross salary generating Employer’s NIC savings of £64 per employee.

For further information and guidance click here on the Department for Transport Cycle to Work Scheme link.