COMPLIANCE
A benefit in kind or a benefit for the whole community? Beverley Gibbs, employment taxes consultant at PSTAX , discusses the taxation issues and suggests that there is precedent for HMRC and the Treasury to extend concessionary treatment Employer-provided seasonal flu jabs
I t is common practice for many employers to offer seasonal flu jabs to their staff every year. This is especially true of public bodies, where staff illness can have a serious impact on services to the public. This is generally done by contracting with a supplier to come in and give the vaccinations in the workplace or bulk purchasing vouchers for staff to use at a pharmacy. As readers may know, the tax treatment of a flu jab, if contracted for in this way, would generally qualify under the trivial benefit rules and be exempt. There are four conditions that must be met for a benefit to be considered ‘trivial’: ● it cost the employer £50 or less to provide ● it isn’t cash or a voucher exchangeable for cash ● it isn’t a reward for the employee’s work or performance ● it isn’t in the terms of employee’s contract. If a benefit meets all the four conditions, no tax or National Insurance contributions (NICs) are due and there are no reporting
obligations. However, 2020 has not been a normal year. The pandemic has been challenging for organisations in many ways and the health and safety of employees has had to be an employer priority. Since the summer, the government has been encouraging everyone to have a flu jab, especially those in the front line, to prevent the National Health Service being swamped with flu patients if, and when, the second wave of Covid-19 struck. This has led to a chronic shortage of the flu vaccine and many employers, especially in the public sector, could not carry out their normal programmes of mass vaccination of staff in the workplace or bulk purchase vouchers. As a result, a very large number of employers have had to ask relevant staff to find out where they are able to obtain a flu jab, pay for it personally and claim reimbursement of the costs through expenses. Although the flu vaccine would normally be treated as exempt under the trivial benefit rules, the exemption cannot apply to cash reimbursements. Therefore,
employers who allow these claims are, in strictness, required to deduct PAYE (pay as you earn) income tax and class 1 NICs on them. This would, of course, result in the employee being out of pocket. The reimbursement could always be grossed up to ensure that the employee did not suffer the tax/NICs on the cost of the flu jab, though this would require time- consuming manual intervention for payroll and would be very expensive for the employer. An alternative to grossing up through payroll would be to use a PAYE settlement agreement (PSA) to meet the tax/NICs costs arising on the reimbursements. However, it should be noted that a PSA would not normally be available for a cash sum. Using a PSA would significantly increase the cost of the flu jab to the employer, with a £14 flu jab costing an additional £5.91 in grossed up tax and NICs for a basic rate taxpayer and an additional £12.55 for a higher rate taxpayer. Given the thousands of staff likely to require flu jabs, this would cause significant and unbudgeted extra costs for the public sector arising directly from the Covid-19 pandemic. The government has consistently promised that this would not happen. PSTAX has identified this issue as
...the government has been encouraging everyone to have a flu jab, especially those in the front line...
| Professional in Payroll, Pensions and Reward | February 2021 | Issue 67 22
Made with FlippingBook - Online magazine maker