Reply to: Gym membership

[Jessica@WhiteFieldTax]

£70 a month? Gosh.

One of the nicest things about WFH is converting garage to gym, and being able to exercise in private any time of day or night. And better quality equipment than the budget stuff the council put into our nearest public gym.

** smug feeling **

[SandyD]

Not that it answers your questions, but this might help you avoid some silly £70/month gym:

Cheap Gyms: Free passes & membership from £10/mth

Thanks will have a look

Hopefully your contract in a stupidly expensive area pays stupidly well

Nope had to reduce my rate a lot actually

[d000hg]

Not that it answers your questions, but this might help you avoid some silly £70/month gym:

Cheap Gyms: Free passes & membership from £10/mth

Hopefully your contract in a stupidly expensive area pays stupidly well

[Jessica@WhiteFieldTax]

Eek has covered the salient point above - although the same tax code applies to a outside IR35 contractor and a permie/their employer, the differing circumstances of a contractor and the inherent flexibility in the business model means that the tricks and benefits used in peridom don't translate across.

Keep it simple...

Oh, and as well as gyms, same goes for bicycles and cycle,to work schemes... Lovely in theory, but not necessary....

[wurzel]

You don't need a fancy gym or expensive gear to be as fit as me

Solitary Fitness

[psychocandy]

This was my understanding in the past, but recently in the permie world that has changed, and I saw several companies taking advantage of that, so instead of given an employee a basic salary + benefits, they have changed the model where all the benefits are taken out of the employee's salary before its taxed, hence the employees pays less tax as their salary would appear a lot less.

Yes I have an accountant, and will discuss it with him... but this is an Accounting Forum... if we are not allowed to ask accounting questions on it, then why bother have one?

But if employer gives you £1000 salary or £800 salary plus £200 worth of benefits, its still £1000 you will get taxed on.

[eek]

The thing is that you have to look at the model:-

Gym membership say

Employer pays their NI on the £1000

You pay tax on the benefit value £1000

However you don't pay employee NI contribution on that £1000.

Now think about how your company pays you:-

very low salary to avoid hitting the NI limits
vast majority of income taken as dividends.

For an employee paid a reasonable salary taking benefits saves money.

For a contractor it costs you money as you'll have to stump up the employer NI side of things. And thats before the fact you'll probably get a better deal by shopping around.

[SandyD]

My last permie company did this. Introduced a flex benefits scheme with a catalogue of stuff from pet insurance to shopping vouchers. Problem was many of them were still cheaper if you shopped around and paid it post tax. The workforce went mad as well as it displayed your full income so rather than 30k+holidays+pension it displayed £50k and you had to buy your holidays and pension from that. People were furious because they wanted the £50k and didn't understand that holidays and pensions etc were a cost to the business. Right debarcle it was. Sometimes giving choice to masses is not a good idea. Thing is this affected your personal tax not the companies tax. They are too entirely different things.

Agreed, I had an offer from a permie recently with such offer, when I investigated further I found out some benefits they are offering are actually more expensive than if I shopped around myself, e.g. my own private health insurance is a lot cheaper even though comprehensive with a good insurance company than the one they claimed to offer at a good discount..

However, what I was wondering is if we could apply this model within our Ltd companies? And the benefits/liabilities.

[northernladuk]

This was my understanding in the past, but recently in the permie world that has changed, and I saw several companies taking advantage of that, so instead of given an employee a basic salary + benefits, they have changed the model where all the benefits are taken out of the employee's salary before its taxed, hence the employees pays less tax as their salary would appear a lot less.

Yes I have an accountant, and will discuss it with him... but this is an Accounting Forum... if we are not allowed to ask accounting questions on it, then why bother have one?

My last permie company did this. Introduced a flex benefits scheme with a catalogue of stuff from pet insurance to shopping vouchers. Problem was many of them were still cheaper if you shopped around and paid it post tax. The workforce went mad as well as it displayed your full income so rather than 30k+holidays+pension it displayed £50k and you had to buy your holidays and pension from that. People were furious because they wanted the £50k and didn't understand that holidays and pensions etc were a cost to the business. Right debarcle it was. Sometimes giving choice to masses is not a good idea. Thing is this affected your personal tax not the companies tax. They are too entirely different things.

[SandyD]

Sandy - you need to speak to your accountant and ask him to explain Benefit in Kind.

I think you will find that, even in permie world, if your employer provides you with anything it will be a benefit in kind. Basically, whatever it has cost you will be taxed on anyway.

Even if the employer, out of the goodness of their heart, paid this £200 for free, then you'd still be taxed on it as £200 income. Because you got it. No way around it.

.

This was my understanding in the past, but recently in the permie world that has changed, and I saw several companies taking advantage of that, so instead of given an employee a basic salary + benefits, they have changed the model where all the benefits are taken out of the employee's salary before its taxed, hence the employees pays less tax as their salary would appear a lot less.

Yes I have an accountant, and will discuss it with him... but this is an Accounting Forum... if we are not allowed to ask accounting questions on it, then why bother have one?

[northernladuk]

You could also try using the search engine when asking for stuff like this. Chances are it has been asked plenty of times before...

https://www.google.co.uk/search?q=gy...hrome&ie=UTF-8

[psychocandy]

Thanks Craig, I know companies nowadays count employee benefits differently so they discount it from the employees salary before tax, hence the tax they pay is after all the discounts.. e.g.
If employee salary is 1000, and they opt for a gym benefit and health insurance lets say total of £200 a month, the company will discount the £200 from their salary before tax and they will be taxed on £800 earning not £1000 (i.e. as far as the HMRC is concerned their salary is £800 not £1000)...

Is there a way of doing the same ?

Sandy - you need to speak to your accountant and ask him to explain Benefit in Kind.

I think you will find that, even in permie world, if your employer provides you with anything it will be a benefit in kind. Basically, whatever it has cost you will be taxed on anyway.

Even if the employer, out of the goodness of their heart, paid this £200 for free, then you'd still be taxed on it as £200 income. Because you got it. No way around it.

Think about it - do you really think HMRC would let you get away with if you said employer pays me zero but pays my mortgage, car loan, car insurance, food bill etc. instead? They could but it'd all be classed as a BIK (although car is a little more complex).

There are a few things which dont attract BIK but not many and certainly not health insurance and gym membership.

[northernladuk]

What a company pays it's staff and what is a taxable benefit are two completely different things.

If it is for personal use, pay it personally.

You do have an accountant don't you?

[SandyD]

Yes you can BUT......there will be a benefit in kind where the company will be charge Class 1A NIC (13.8%) on the gym amount (benefit value) in the tax year which is deductible for corporation tax relief.

You personally will also be taxed through self assessment at either 20%, 40% or if you're lucky, 50% on the gym amount too.

In most cases, where it's your own company, you're probably better off paying for it personally.

Thanks Craig, I know companies nowadays count employee benefits differently so they discount it from the employees salary before tax, hence the tax they pay is after all the discounts.. e.g.
If employee salary is 1000, and they opt for a gym benefit and health insurance lets say total of £200 a month, the company will discount the £200 from their salary before tax and they will be taxed on £800 earning not £1000 (i.e. as far as the HMRC is concerned their salary is £800 not £1000)...

Is there a way of doing the same ?

[Craig@Clarity]

Yes you can BUT......there will be a benefit in kind where the company will be charge Class 1A NIC (13.8%) on the gym amount (benefit value) in the tax year which is deductible for corporation tax relief.

You personally will also be taxed through self assessment at either 20%, 40% or if you're lucky, 50% on the gym amount too.

In most cases, where it's your own company, you're probably better off paying for it personally.