The company I work for would like to introduce a new initiative, Buy Your Own Technology. Each employee will be given a budget to reflect the kit they need to do their job. We then purchase a laptop, smartphone or tablet and they pay back the difference over two years as a salary sacrifice. At the end of the two years they own the equipment outright.
For example:
Johnny Golightly wants to own and use for his work a laptop, iPhone and iPad.
The total cost is £1500.
Less VAT the cost is £1200, over 24 months the cost to own would be £50.
Johnny has a budget allocated to him of £40 per month, based on him needing all three for work but not necessarily at that spec.
As such the deficit is £10 per month.
The proposal is that the £10 is taken at source as a salary sacrifice.
Had Johnny picked a PC and not a trendy MacBook he might not have had anything to contribute.
The scheme will be tailored to the individual based on their role.
The scheme will be built based on your roles and technology both required and desired.
It is not intended to fund high performance gaming machines or fund iPads that never come to work with them.
My concern as bookkeeper here is the legality of offering the scheme as a salary sacrifice. Are we allowed to run the scheme as if it were Cycle to Work? What are the legal implications?
The fact is that the employee wants rather than needs the additional spec equipment.
Also it would seem that as the employee will feel that they are contributing towards the equipment then it's use will not be wholly, necessarily and exclusively for the purpose of the business putting the £40 contribution on rocky ground.
The employee in this example neither owns the asset (£40 per month from employer) nor is it the employers property (£10 contribution from employee).
Combined with the issue over not being wholly, necessarily and exclusively for work this creates a BIK of 20% of the £1200 less the employee contributions.
So, £240 less £120 contribution. BIK of £120 p.a.
At the end of the term the employer gifts the asset so £1200 less £240 use benefit already born is going to be an end of term benefit of £960 on the employee (£960 presumably being higher than market value).
Using that method the employee should still come out of that owning the equipment and at about evens on buying the equipment on the open market.
However, would not a simpler approach be a cheap employee loan for the equipment and a taxable equipment allowance extending the employee's basic salary by £40 and then taking the £50 from salary. Employee loses on PAYE but wins on the BIK. Swings and roundabouts.
As the employee loan is less than £5000 no benefit should arise on the loan.
Sure that Tim or Mark or one of the other very clever tax people on here will be along imminently to tell me that I'm reading the scenario all wrong. (having one of those days where even my trusty calculator seems to be conspiring against me... I'm not paranoid, it really is out to get me!).
kind regards,
Shaun.
p.s. even cycle to work creates a BIK at MV less contributions to date
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
