Other benefits in kind

Making any payment to an employee in respect of charges incurred for the use of a car park at or near to their place of work is exempt from benefit in kind charges.

The principal use of the car park should be by the employee as a consequence of attending his/her place of work.

The provision of a free or subsidised car parking space at or near to the employee’s place of work is exempt from benefit in kind charges.

The principal use of the car park should be by the employee as a consequence of attending his/her place of work.

Spaces provided to partners or dependants, who are not employees of the business, are subject to a benefit in kind charge, based on the value of the benefit provided, less any contribution made towards this benefit.

Nursery or crèche facilities paid for by an employer for an employee’s child, where the facilities are necessary to enable an employee to perform the duties of employment, will qualify as an exempt benefit providing payments are made in accordance with certain rules.

To qualify for the exemption the child care fees must meet the following conditions;

• payment must be made to a registered nursery, crèche or childminder
• the childcare cost must relate to a child, stepchild or ward of the employee
• payment must be made directly from the employer to the qualifying crèches or nursery

In addition a work place crèche provided by the employer will be exempt from a benefit in kind charge.

Where the child care payments fall into the following criteria the payments will not qualify as an exempt benefit;

• where the employer makes a payment directly to the employee to cover childcare cost it will be taxable and should be subjected to ITIP deductions
• where the employer directly meets the cost of childcare as a result of a salary sacrifice arrangement, a benefit in kind charge will still apply, unless the salary sacrifice meets the conditions as set out in the employers guide.

There is a general benefit in kind exemption on Christmas party expenses of up to £100 per head. Where Christmas parties are not held, the Division will allow the exemption to cover one annual event per year.

If an employee has goods or services provided to them via the use of a company credit card or company account with a supplier, then a benefit in kind charge will arise unless the full value of commodities paid for on their behalf is repaid in full to the employer.

The provision of mobile telephones, including line rental and private calls, paid directly by an employer is not a chargeable benefit in kind provided the phone contract is in the name of the employer.

If the employer pays the bills for a mobile phone where the contract is in the name of the employee a benefit in kind will arise to the value of private calls that have been paid for.

Where a company runs a prize draw and provides a gift or voucher to an employee, then a benefit in kind charge will arise on items which are valued at over £400.

If an employer provides tea and coffee to its employees, the Division will not pursue a benefit in kind charge on these sundries provided.

If goods are sold to an employee at a discount, there is usually no taxable benefit to consider, as the merchandise is normally not sold below cost value. However, if the goods are sold below cost value then the taxable benefit is the cost to the employer in providing the benefit, less any contribution by the employee.

Where a pension, annuity, lump sum, gratuity is given to an employee on their retirement or in the event of their death these benefits are transferred to their children, spouse or dependants, no benefit in kind charge will arise.

Where an employer provides membership for a club or society, a benefit in kind charge will arise on the value of the fees paid on the employee’s behalf

Any costs associated with the provision of a home broadband connection, regardless of whether it is for business or private use can be treated as being a benefit falling within the current £1000 annual exemption for computers.

If an employer pays an employee’s home landline telephone bill, a benefit in kind will arise. The value of the benefit will be the value of the employee’s private calls.

Where an employer waives or forgives an employee’s debt a benefit in kind charge will arise.

This could arise where;

• a directors loan account is written off
• an employee loan is written off

In these cases the benefit in kind will be the amount of the outstanding loan written off.

If an employee is provided with a gift by their employer for long service for their business the general benefits rule should be applied. Any gift which has a value over £400 will be subject to a benefit in kind charge.

Cash given to an employee in respect of long service should be put through the payroll and subject to tax and national insurance.

If the employer takes out a plan which pays for the health screening, diagnosis and treatment of an employee who falls ill or needs dental work, the cost will qualify as an exempt benefit and there is no benefit in kind charge.

If an employer’s scheme simply pays a cash sum if an employee undertakes a stay in hospital, then it would not qualify for a benefit in kind exemption and must be reported on a form T9 for the employee.

If the plan provides not only for the employee but also for their dependants, the contribution the employer makes to cover the dependants is chargeable as a benefit in kind and must be reported on a form T9 for the employee.

If the employee takes out their own personal health cover and the employer pays their plan premiums on their behalf then a benefit in kind charge would be due as the employer is meeting a pecuniary liability of the employee. This does not qualify as an exempt benefit as the employee is not in a scheme offered by the employer.

If employees are picked up only for journeys between home and work and journeys between one job and another, there will be no benefit in kind charge.

A minibus normally would have a seating capacity of between 9 and 12.

The cost of providing newspapers and periodicals to employees for business purposes is exempt from benefit in kind. This would not apply where business use is incidental.

If an employer meets the charge on an employee’s personal accountancy expenses, then a benefit in kind charge will arise. For example a personal income tax form of an employee completed at the expense of the employer would generate a benefit in kind charge.

Personal use of a company asset is regarded as a benefit in kind. The benefit in kind value is determined by the type of asset made available. Examples of company assets are jet skis, plant and machinery etc.

The annual benefit in kind charge for private use of a company asset is calculated as 20% of the asset market value when first made available to the employee.

The charge is not subject to apportionment if the asset if wholly or partly used during a tax year and is charged on the basis that it is available for private use, as in the case of cars.

Employers should also include any private running costs associated with the use of the asset, separately on the benefit in kind form.

This charge only arises where the employer does not charge the full market rate for the provision of the asset.

If the asset is a car or living accommodation, the benefit in kind value is calculated by an alternative method. If the asset is computer equipment, it may be an exempt benefit.

The benefit in kind charge is 20% of the market value of the asset when first made available plus any private running costs associated with use of the asset.

The charge is an annual value based on the fact that the asset is available during the year for private use. It is not a proportional charge for private use so does not reflect the number of days actually used.

For example an employee has private use of a company aircraft for 10 hours during a particular tax year. The aircraft is used for 90 hours of business use.

The charge is 20% of the market value of the aircraft when first made available. The charge is not an apportionment of the market value of the aircraft based on private/business use and is based on the whether the asset is available for private use during the tax year.

The employer should include any private expenses incurred with the running of the aircraft separately on form T9.

This charge only arises where the employer does not charge the full market rate for the provision of the asset.

Relocation expenses are reasonable payments made by an employer as a direct result of a person moving to the Island to take up employment.

The Income Tax Division will not tax relocation payments that are made within certain limits for certain expenses. The intention of the relocation exemption is to assist employers where the employee relocates to the Island to undertake full time employment and residence on the Isle of Man.

The exemption does not apply where an individual comes to the Isle of Man for the purposes of setting up a business, as the individual has not relocated for the purpose of taking up employment.

The concession does not cover relocation expenses of an employee leaving the Isle of Man.

Please see Practice Note 193/16 for full details of the exemption.

Reasonable relocation expenses of no more than £20,000 in total

"Reasonable relocation expenses" include:

• the direct costs of selling the person's current home;
• the legal costs of acquiring a new home in the Isle of Man;
• removal expenses; and
• indirect costs relating to the move, such as replacing carpets and curtains in the new home.

Travel expenses

In addition to the £20,000 limit for relocation expenses, the exemption will also apply to costs met by the employer for travel between the person's previous home and the Isle of Man in the first 6 months of employment.

An employee who receives travel between the Isle of Man and a destination which is not their previous place of residence is subject to a benefit in kind charge.

Temporary accommodation

The exemption will also apply to costs met by the employer for the provision of temporary accommodation for the person in the first 3 months of employment.

Reporting and record keeping

In the event that the total "reasonable relocation expenses" exceed £20,000, the employee will be subject to a benefit in kind charge in respect of the amount exceeding the £20,000 limit. This amount should be reported to the Income Tax Division on Benefit in Kind form T9.

Any personal travel costs met by the employer after the first 6 months of employment will be subject to a benefit in kind charge and should be reported in full on form T9.

Where the costs of temporary accommodation continue to met by the employer after the first 3 months of employment, such expenses will be subject to a benefit in kind charge and should be reported on form T9.

There is no need to report relocation expenses within the £20,000 limit, nor is there any need to report travel expenses or temporary accommodation costs falling within the time limits mentioned.

Full records of all payments made must, however, be maintained by the employer and must be available for inspection under the ITIP Regulations.

As school fees are a personal expense, any costs paid for on behalf of the employee would be subject to a benefit in kind charge.

Various types of share schemes are provided by employers to their employees. This section provides some advice regarding the treatment of these schemes.

Due to the technical nature of share schemes, it is advised that agents and employers, who are considering the commencement of a scheme, contact the Division to seek clarification on their treatment.

If an employer operates a share option scheme or similar scheme they can request an exemption from income tax on benefits arising from these schemes.

The schemes must conform to certain requirements and must be approved by the Assessor of Income Tax, otherwise tax will be chargeable in relation to all shares and other benefits provided via the scheme.

If an application for approval is to be made, then the following information must be provided:

• a copy of the rules of the scheme and a copy of the trust deed under which the scheme has been established
• a copy of the form of contract under which the options will be granted
• a copy of any documents which will be issued to participants in connection with the scheme
• a copy of any approval of the scheme, issued by any overseas tax jurisdiction, if appropriate.

Where a company operates a share option scheme or similar scheme, which has not been granted approval by the Assessor of Income Tax; where approval has been withdrawn or where the terms of the approval of the scheme have been broken, a benefit in kind charge will arise and must be reported on form T9 for the employee concerned.

The use of facilities located at an employer’s place of business is exempt from benefit in kind charges.

Entertainment provided to employees, which has no business purpose, is subject to the normal rules regarding chargeable general benefits in kind.

Examples where a charge would arise are;

• drinks supplied to staff in the boardroom every Friday
• tickets provided to staff for theatre, concerts, football
• summer ball

Note that there is a general benefit in kind exemption on Christmas party expenses of up to £100 per head. Where Christmas parties are not held, the Division will allow the exemption to cover one annual event per year.

When an asset that is owned by a company is given to an employee a benefit in kind charge will arise, unless the employee pays the employer the market value for that asset.

Providing the asset has been used and depreciated by the company prior to the transfer, the benefit in kind charge is the lower of:

• the cost to the employer of providing the benefit, or
• the open market value of the asset at the time it is transferred to the employee.

If the asset has not been used or depreciated by the company before it is transferred to the employee, the benefit in kind charge is the higher of:

• the open market value at the time of transfer, or
• the cost to the employer of providing the benefit.

If an employee has been charged a benefit in kind for the use of a company asset and that same asset is transferred to them at a later date, the benefit in kind charge will be calculated by taking the value of the asset when first made available and deducting the aggregate benefit in kind charges for use of the asset prior to transfer.

Where travel is provided to an employee or dependant, which is not business in nature then a benefit in kind charge will arise.

Travel can be for business purposes only, but can also include a private element. To assist in determining correctly whether a benefit in kind charge arises, some examples are shown in the table below;

Where courses, tuition or training is paid for on behalf of an employee there will be no charge if it is either specifically or generally employment related.

Where it relates to personal interest courses or personal interest training then a charge will arise based on the cost to the employer in providing the course, tuition or training.

If an employer pays an employee’s personal bills, a benefit in kind will arise on the value of the liability covered by the employee.

If an employee is provided with protective, specialist, or safety clothing no benefit in kind charge will arise. In addition where an employee is provided with a uniform which identifies a wearer as having a particular occupation or reinforces a corporate image, no benefit in kind charge will arise.

Shoes, socks and underwear are not considered part of the exemption for uniforms. Non specialist or clothing not considered to be corporate wear provided by an employer is subject to a benefit in kind charge, based on the value of the benefit provided, less any contribution made by the employee.