Vat implications of perks such as a corporate membership to a local gym and / or possibly offering subsidised meals in their canteen.
HMRC’s policy on employees perks and rewards is that services provided to staff can be a legitimate business expense if they are provided mainly to reward or motivate staff. If so, the VAT incurred is all input tax. No apportionment under section 24(5) of the VAT Act 1994 is necessary. In some cases, a charge to output tax for private use may have to be made under the Supply of Services Order. However, HMRC goes on to say:
“Where facilities are provided to all employees strictly for the purposes of the business it is generally not our policy to apply such a charge. However, perks provided to specific individuals within a business should generally be subject to an output tax charge to reflect private use.” Therefore the important point being “provided to all employees”
There is Specific guidance provided on recreational facilities which confirms that where sports and recreational facilities are available to all employees, the VAT incurred on the cost of providing the facilities is input tax. Again it is not HMRC’s policy to apply the Supply of Services Order. If any charge were to be made then output VAT would be due on that amount.
As far as staff meals is concerned HMRC’s directive specifically refers to the provision of food and drink in the course of catering by an employer to an employee. Where such supplies are made, the value of the supply is the monetary consideration alone, if any, paid by the employee. So where an employee pays for a meal, snack or drink, the supply is standard-rated and the value of the supply is the amount paid. Where an employee is not required to pay for a meal, snack or drink the value of the supply is nil and no VAT is due.
Following the judgment of the Court of justice of the European Union in Astra Zeneca Case, where employees pay for benefits under a salary sacrifice arrangement, employers must account for VAT on the value of the supplies unless they are exempt or zero-rated. Subject to the normal rules, the employer can continue to recover the VAT incurred on related purchases. Equally where deductions are made from a salary for the benefits, the value of the supply is the amount deducted.
The information contained in this article is for general information purposes only and does not constitute advice, Whilst we endeavour to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability for a particular purpose. We recommend that professional advise should be taken from a suitably qualified expert before undertaking any action.