There are many benefits of working from home from an employee’s point of view. The savings in time and costs of commuting to work are significant. The improvements in family bonds can also provide real dividends – being there for when your children leave for school or being at home for dinner with the family and tucking the children in at night are benefits which many parents find priceless.
However there is also a negative side. It has been widely reported that mental stress has increased significantly over the lockdown period, due in part to feelings of increased isolation. Anxiety and stress are on the increase and productivity for many is on the decrease.
Similarly alcohol consumption which would have zero tolerance in the work place is now becoming endemic with workers at home, with a recent article from Personnel Today reporting that a staggering 83% of workers questioned in their survey said they drank while working from home at least twice per week. Surveys in both the UK and the US have reported a huge increase in alcohol consumption during lockdown. The impact on work is significant with reductions in quality and quantity of work due to poor decision-making, disruption to operations and co-workers covering for alcohol-affected employees.
So what can be done? The NHS have put out a helpful 7 point checklist with simple tips.
However there are only two small references to exercise one of which says to go for a walk, run or bike ride.
From a mental health and productivity point of view one of the biggest things we can all do is to increase our physical activity. Short bursts of exercise increase our mental alertness, energy and positive mood.
So what can your business do to help your team and yourselves whether working in the office or from home?
There is a growing trend for businesses to provide facilities for employees to improve and maintain their physical health. For larger firms this often means they install a gym on the premises for employees to work out before or after work, or even during lunch. An alternative is for businesses too small to install an entire gym to subsidise gym membership for staff or to get a personal trainer to visit the premises. Another option is to have meetings on the move. Instead of sitting around a table in a stale room to discuss ideas, take the meeting whilst walking in the (comparatively) fresh air outdoors or perhaps try a standing meeting with a cup of coffee.
In this article we detail a number of options and looked at the tax consequences of each option.
In-house gyms or sporting facilities such as playing fields, clubhouses and squash courts can be provided tax –free under section 261 of ITEPA 2003 provided that they are:
- Generally available to all employees.
- Not provided on domestic premises.
- Not generally available to the public at large.
- Not used for holidays or overnight accommodation.
- Not vehicles or vessels such as go-karts or motor boats.
Unfortunately the provision of quality in-house facilities is not open to most small businesses!
Membership of local sports or fitness clubs is an option but is not generally tax-free as they are open to the general public. Costs of providing these facilities would normally be treated as a taxable benefit and accounted for on form P11D. Provided the company contracts for the membership then income tax is payable by the employee and class 1A NI will be payable by the company. This can still be an attractive benefit for employees as they do not pay any class 1 employee’s national insurance.
Gym membership may be tax free if you can obtain exclusivity for a period of time when the gym is closed to the general public. In practice however this is rare.
You may be able to make block-bookings of a public sports centre run by (or on behalf of) a local authority, but these tend to be restricted to outdoor facilities such as tennis courts or football pitches. You cannot usually block-book gyms or swimming pools except for special occasions.
If you do make a block-booking for your staff make sure it is in the company name (or your own name if you are a sole trader) not the person making the booking. The bill should also be paid by the business, not reimbursed on expenses to the person who booked it.
Recreational facilities are tax-free provided they satisfy the criteria listed above. This is a much more practical alternative for smaller businesses as it is far less expensive to buy your staff a pool table or table tennis table than a fully equipped gym.
However, the facilities must be mainly for the use of your own staff (including you). If they turn out to be used mainly by your customers or guests, then it would be treated as business entertaining instead, which is disallowable for both VAT and corporation tax.
Home gyms are unfortunately not a tax free benefit due to the fact the facilities must not be provided on domestic premises. But this does not preclude you from providing yourself or your employee a home gym. The benefit in kind will be equivalent to 20% of the VAT inclusive cost of the equipment provided calculated on an annual basis- i.e. if you provide equipment to an employee for five years the benefit in kind is 20% of the VAT inclusive cost every year. So if say you spend £2,000 inclusive of VAT on gym equipment then the benefit in kind is £400 per year which for a basic rate taxpayer gives rise to an £80 tax bill or for a higher rate taxpayer £160. In addition a form P11D will need to be completed to report the benefit and 13.8% class 1A employer national insurance will be due on the benefit value.
The equipment must be bought by your company so the VAT could be reclaimable and your company may be entitled to capital allowances on the equipment. This still might make sense and be a cheaper option than providing a gym membership to an employee. You will need to run the figures. For a director you also have to consider whether it would be cheaper simply to pay more dividends out and pay for the equipment privately. This will usually be the case.
Your Own Personal Trainer!
This is a great one and we have seen one of our clients successfully introduce this to their workforce. Essentially you hire a fitness instructor to coach you and your staff through a fitness programme. You could buy group sessions, for those willing to commit, or just have the trainer turn up once a week for those interested in participating on the day.
It would be important to include everyone as sports facilities must be made available to all your staff generally. You cannot restrict them to yourself or to a select group of employees, otherwise it would be treated as part of their remuneration package and hence taxable.
The thing to note is that to qualify for exemption you need to pass all the criteria detailed above.
Key points are:
- If you work from home then this won’t work. It must be carried out on non domestic business premises or in a facility where you have block-booked to prevent access to the general public.
- In practice you need to ensure your company enters into a contract with the trainer (or the club that employs them). The trainer must not be coaching anyone else but you and your staff, so their services are not generally available to the public at large (at least not whilst they are coaching you).
For the company the cost of the trainer would be a trading expense as it is part of the cost of employing you or your staff (best to have a board minute authorising this). Therefore, it is deductible for corporation tax. It would hopefully also be a tax-free benefit, so you and your staff would pay neither income tax nor National Insurance contributions. Effectively, the taxman would be subsidising your keep-fit programme.
We must reiterate that to get a tax effective scheme you must abide by the legislation otherwise your scheme may not work in practice.
Note also that it is not just personal trainers who are covered by this exemption. Tennis coaches, swimming instructors, horse-riding trainers, etc. may also qualify so long as they do not involve a vehicle or vessel (so sailing or go-karting are out!). Block-booking a riding school after work and allowing all your staff to attend for riding lessons could work!
If you are a one man company and think this will work for you as the sole employee of the company then we would advise against it, particularly if your remuneration package is such that you are paid below the minimum wage (classic low salary, high dividend situation). HMRC do not challenge the low salary as they consider company directors as office holders and not employees. In practice given that low paid directors will not be considered as employees we believe that a scheme as detailed above could be challenged by HMRC.
Your family can be involved too!
This tax break is very useful because it applies not just to you but also to members of your family or household. So long as the sporting or recreational facilities are provided mainly for employees, their families are covered by the exemption too.
However, their use of the facilities should be incidental to your own. The facilities should not be provided solely for the benefit of your spouse or children (apart from a workplace crèche which is tax-free) or you would be taxed on the benefit.
Company bike scheme
Don’t forget the company bike scheme. We wrote about this in a previous article.
Please note however that an important rule for qualifying under the scheme is that the majority of the use of the bicycle should be on journeys from home to work, between one workplace and another or on business trips. The COVID-19 pandemic has changed working practices and as a result HMRC have temporarily relaxed the rules for those employees who are now working from home who have already been provided with a company bicycle. Provided employees have joined a scheme, with a cycle or cyclists’ safety equipment provided to them on or before 20 December 2020, the qualifying journeys condition will not be applied until after 5 April 2022.
Employees who have a cycle or cyclists’ safety equipment provided after 20 December 2020 will need to meet all the conditions for the exemption to apply.
Those working from home
We started this blog by outlining the problems home workers are facing.
So what are the solutions?
- Firstly encourage your team to exercise every day before work and ideally make sure they take breaks and carry out some form of vigorous exercise or at least a brisk walk for 10 minutes.
- If you have meetings with your team and just need to talk to them then why not encourage them to do the meeting whilst walking.
- A gym membership or the provision of a home gym might still make sense and could be a valued benefit in kind for the employee.
- Alternatively if you have a group of employees what better way to build the team than to block book recreation facilities say for 5 a side football. Great team bonding and improved fitness, and provided it is open to all the cost is a tax-free deduction in the company books.
- Finally you may want to consider finding a trainer who can provide zoom training sessions for your staff (we would not suggest this for director only companies). They are out there! If you can arrange for them to be exclusively for your team then we would hope that the spirit of the legislation will be applied and the training provided tax-free. Strictly the exemption could be disapplied depending on the interpretation of a qualifying facility provided at a domestic premises. If you interpret the facility as being only available to employees and not the general public and provided by the trainer from his or her business premises then maybe this will work. We would recommend you discuss this with your advisor before implementing. Hopefully the tax legislation will catch up with our ever changing world and clarity will be provided in this area.
There is no doubt exercise is an essential element to our wellbeing. From a business owner’s perspective it can lead to increased productivity and reduced absenteeism.
Hopefully in the coming months the government will address the increases in mental health problems and alcoholism arising from working from home and stimulate a much wider discussion on how to reap the benefits of home working whilst ensuring increased productivity through new tax incentives for businesses to help their teams get into better physical condition. We will update clients of any changes in due course.
If you are interested in introducing any of the above then please call us to check out the tax implications. At Friend & Grant we are always on the lookout for the many ways we can help our clients to save tax and grow their businesses.
Please note that at the time of writing there is legislation in place that restricts people from leaving home unless they have a “reasonable excuse” for doing so. The non-exhaustive list that accompanies the legislation suggests that exercise will count as a reasonable excuse, although government guidance suggests this should only be once a day.
The content in this blog is correct as at 04/02/2021. See terms and conditions.