Tax Saving Tips for Directors and Employees

December 19, 2018 tax 0 Comment

Tax Saving Tips for Directors and Employees

We have 15 excellent tips on how you can reduce tax when providing benefits to directors and employees.

  1. Tax-Free Voucher for Employees

Revenue’s Small Benefits Exemption Scheme allows you to give employees a small benefit of up to €500 in value, tax-free, each year. This benefit must not be in cash. 

If more than one benefit is given in a year, only the first one qualifies for tax-free status. Unused allowance amounts cannot be carried over. 

Please note tax-free vouchers or benefits can be used only to purchase goods or services. They cannot be redeemed for cash.

This is a non-statutory concession. It should apply to any employee, including directors who are also employees (i.e. have an employment contract).

Possible tax Savings

A higher rate tax payer will save up to €520 in tax by availing of this scheme.

Net Salary equivalent €500

To pay this you need a Gross salary €1,020 

A difference of €520 relates to PAYE of 40%, USC 7% and Employees PRSI of 4%.

There is also a saving of 10.75% Employers PRSI for those employees on the A class rate. 

  1. Pension contributions

The employer contribution is fully tax-deductible and is tax-free for the employee, other than the USC applying where payments are made to a PRSA.

  1. Bike to work scheme

An employer can purchase a new bicycle and safety equipment on behalf of an employee, tax-free, up to a value of €1,000, provided that the bicycle and equipment are mainly used for travel to and from work or for other work-related journeys.

  1. Travel pass

The provision of a travel pass to enable an employee to travel to work can be made tax free.

  1. Mileage and subsistence

Mileage expenses to cover the use of a personal motor vehicle used by an employee for business can be paid using civil service rates. Adequate records must be kept. 

There are also civil service rates for Subsistence. These can also be paid to employees who are outside the office for more than 5 hours in the carrying on of their employment duties. 

Foreign business travel and subsistence can also be paid.

  1. Certain payments to E-workers

Where employees work for substantial periods outside the employer’s business premises in the course of the performance of the duties of their employment, an employer can cover certain costs on a tax-free basis:

  1. Work Equipment 

Examples here would be computer, printers, office furniture to allow and facilitate the employee work in their home. Any personal use should be incidental.

  1. Light & heat. A contribution of up to €3.20 per day can be made. Additional amounts can be claimed on a vouched basis.
  1. Costs of business calls on home and personal mobile phone.
  1. Sports and recreational facilities

These can be made available to employees’ tax-free where the facilities are on the employer’s premises for the use of employees generally.

  1. Free periodicals and newspapers 

Where these are provided by the employer and are generally related to the employer’s business, a taxable benefit does not arise.

  1. Reasonable employer contributions to employee social club

These can be made tax free where membership of the club is available to all employees.

  1. Mobile phones provided for business use

Incidental private use is permitted without giving rise to a charge to tax.

  1. Examination awards and exam fees

Awards made to an employee for passing exams or for acquiring qualifications bearing some relationship to the employee’s duties can be made tax free. This needs to be a reimbursement of expenses likely to have been incurred.

Refunding of course and exam fees can be made tax free where the course is relevant to the employer’s business, leading to the acquisition of knowledge or skills necessary for the duties of the employment or to increase the effectiveness of their performance.

  1. Home telephone/broadband

The provision of a home telephone or broadband to an employee for business use where private use is merely incidental.

  1. Professional subscriptions or membership fees

These can be paid tax-free where the subscription is required to carry on employment duties. Be careful about subscriptions that are not directly related to the work activity of the employee.

  1. Medical check-up

Where the employee is required to undergo a medical check-up by the employer and the employer pays the costs there are no tax implications for the employee.

  1. Long service awards for employees

Long service awards are not taxable where the award is for service of at least 20 years; the award is of a tangible article of reasonable cost; the cost does not exceed €50 per year of service, and no similar award has been made to the employee within the previous 5 years. The treatment does not apply to awards made in cash or in the form of vouchers or bonds.

Please contact us if you’d like to discuss the savings tips mentioned above.

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Joe Cunnane Practice Owner TRA Professional Services       Qualifications:  FCA Chartered Accountant & AITI Chartered Tax Advisor Joe has over 20 years experience working in both private practice and industry ... Read More »