A ltd company client is considering getting a corporate gym membership for herself and employees. As it's a corporate membership, the fees would be offered at a cheaper rate to the employees. My questions are, which is better for the employees, for the cost to be declared on a p11d or to be put through as salary? Also can the company claim the vat on the cost of the membership? I'm not fully sure how this works, but the membership is with David Lloyd and from what I can gather they offer it at a reduced rate to the employees, so I'm not sure if the company will pay a flat fee for this service, then the employees pay directly to David Lloyd. I have been asked to find out the best option for the employees tax/ni wise but without it ending up costing the employer a small fortune.
I hope that someone can understand this-it's hard to get my head around!!
Thanks for reading
-- Edited by Blonde Accountant on Tuesday 14th of October 2014 12:03:22 PM
Hi, sorry to push this, but I've looked all over the internet and can't find anything specific. My client really wants some details on Thursday so if anyone has any ideas it would really be appreciated.
Hi,
Assuming the employee wants the gym membership and would be paying for it anyway then the BIK is the way to go not just because it is at a reduced rate but because they will not have to pay any NI contribution (12% for basic rate payer). As you say there will be a P11D tax charge but this would be the same as being taxed through salary increase. If any employees have no wish to join the gym I'm sure they would rather opt for the salary increase however.
The employer will still have to pay the equivalent to Employers Ni at 13.8% on the combined benefits but of course will get tax relief on this in the same way as if it was a salary cost.
I see no reason why they can't claim the vat back.
So I'm back on this, but a slightly different aspect, the employees are sorted, but the client has now said that she will pay for membership for all of the employees and myself and another contractor. My question now is, how do I personally account for this? I am a sole trader, so how does it work for me, the other contractor has his own ltd company so would he deal with it differently? I hope that is clear. Thanks for reading.
Hi Nicola, is your membership part of your fee? If so I think it will form part of your turnover and you should raise a sales invoice to cover this. Otherwise it is a gift and would come out of your clients director loan. This is just my opinion and not a definitive answer so I would like to hear what others think.
1. The flat fee paid by the employer is clearly a BIK and should be treated as such. however, I assume the employee can opt out of this offer. 2 No problems in claiming back the VAT 3 As for your situation I should imagine your client would like to make this offer as tax efficient as possible. so as far as your business is concerned it is taxable income as part of your fees.
Here is a link to your problem http://www.taxcafe.co.uk/resources/taxonbenefitsinkind.html
-- Edited by Energise Accounting on Saturday 1st of November 2014 08:02:55 PM
-- Edited by Energise Accounting on Saturday 1st of November 2014 08:32:15 PM
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Thank-you both, I think that I would raise a sales invoice as that looks as if it be the better route for the client. The possible tax and NI that I would have to pay would be much less than paying for the membership myself. That link is incredibly useful, thanks :)
Nicola
