The Fizz! Blog

Are staff flu jabs tax-free for them? It depends

Many employers pay for their employees to have a flu jab each year.  They figure that the expense will be worth it for a combination of a) reducing sickness absence and b) being kind to their team.

Historically, they’ve most commonly done it by giving the employees vouchers that they can take to a provider to cash in for a jab, or arranged for the jabs to be done at the workplace.  There’s no tax bill for the employee (the voucher or jab will have cost less than £50 and will be covered by the “Trival Benefits” exemption).  

Apparently, in the last year or so demand has increased and vouchers have been harder to get, and many people haven’t been in their workplace to get it done there.  Consequently, many employers have asked the staff to arrange the jab and reclaim the cost on expenses.  That, however, *is* a taxable benefit, and the employee is supposed to be taxed on it - expense claims lie outside the Trivial Benefit rules.

Think about how you’re doing things, not just what you’re doing!

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You buy things to pay MORE tax, not less

You quite often get asked by clients “should we buy some more equipment to save some tax”?  It’s an understandable question - but we’d say it’s exactly the wrong perspective to look at things from.  You should spend money in your business with the intention of paying *more* in tax, not less.

If you buy some bit of machinery or other, then probably it’s because it’s going to make your business more productive, or it’s going to maintain productivity by replacing something else that’s knackered.  If paying £10,000 for this thing ends up making your company an extra £80,000, then it’s better off by £70,000 overall.  The machine hasn’t saved you any tax at all.  In fact, it’s cost you £14,000 of corporation tax!  But that was the whole point of buying it - you bought it to maintain or increase profits, and bigger profits lead to bigger tax bills.  Bigger corporation tax bills are good because they mean profits are bigger and dividends available to owners are bigger.  Anyone who is disappointed that their company’s tax bill has gone up year-on-year probably hasn’t fully grasped how the pieces fit together.

Imagine taking on a new marketing person and paying them £40,000 a year.  In their first year, they bring in enough new business to pay their salary AND contribute another £250,000 of profit on top.  You’re hardly going to fire them because they’ve cost you £50,000 of corporation tax, we hope?  If you look at it from a tax saving point of view, then perhaps you’d prefer that they brought in nothing at all, thereby saving you £8,000 of tax on their salary!  But that’s probably not what you really want.  Actually you’d love them to cost you even more in tax!

Of course, there can be broader “value” than just stark financial benefits.  The value in a purchase might be in making your working life more enjoyable or fun, perhaps.  When we first moved into our current offices, we paid £3,000 or something for a big table and some benches.  Did we do it because we thought it’d directly lead to £3,000+ of extra profit?  No.  But did we do it because it would save us £600 of tax?  Also no.  We did it because we thought it looked cool and it would be quite functional in our workplace and we really liked it.  We still do!  We’re content it’s paid for itself - and would have done regardless of any tax saved or not saved.

So next time, think about asking yourself “Is this purchase going to increase my tax bill?”.  And if the answer is yes, go ahead and make it!

www.fizzhq.com