Take tax advice on staff benefits

01-Apr-2012 - Last updated on 11-Mar-2017 at 21:49 GMT

Be aware: the licensees’ tax position can be affected by benefits to staff, says Peter Coulson

Taxation is never a happy subject at the best of times, but it tends to come to the fore at Budget time. In the licensed trade the question often arises as to whether tax is chargeable on the benefits that an employee receives in addition to their wages. For example, accommodation or other such ‘on the job’ services that come out of the employer’s pocket.

Some years back, HMRC appeared to accept arguments that a pub manager’s job required him to live in, so that he could perform his job better, hence that ‘benefit’ escaped tax.

However, that is not always so. I spoke to one licensee who is being pursued by the Revenue in respect of live-in staff. The problem is that the demand is back-dated for some considerable time and amounts to a fairly hefty claim.

It is not just the actual accommodation, either. Where staff take meals from the kitchen, use lighting and heating and other facilities, these are also perceived as ‘taxable benefits’. The Revenue’s position is that if these were not supplied by the employer they would have to be bought by the individual taxpayer, so what is often seen as a mere gift is viewed as a part of the remuneration ‘package’ that the employee receives.

Clearly, the tax due on these ‘extras’ ought to come out of the pocket of the employee. But if they are on PAYE, it is the duty of the employer to make the necessary deductions. In that case the tax man pursues the licensee for the missing money, which is where all the problems start to arise.

There is history in this. It used to be a widespread requirement by the licensing justices under the previous system to insist that the holder of the licence should reside on the premises. This was not an absolute guarantee, of course, and the Inland Revenue, as it then was, took its own view on the necessity of being ‘on the spot’.

More recently the Revenue has tightened up on this issue and says the duties could be equally well performed whether the person lives at the pub or not. It is unlikely that there would be a condition on a premises licence requiring live-in managers.

All this means that readers must be aware that their own tax position can be affected by the benefits they give to their staff and that it is not good burying your head in the sand. Take professional advice and listen to what is suggested. Then you may avoid ending up with a crippling bill.