Tax implications of return-to-office incentives – AAT Comment

15th May 2024

As businesses continue to navigate the post-pandemic landscape, many are introducing various incentives to encourage employees to return to the office. Nick Bustin, Employment Tax Director, highlights the potential tax and National Insurance (NI) implications of such incentives.

Companies are now offering perks such as free breakfasts, fruit baskets, social events, and even covering commuting costs to make office environments more appealing. However, organisations need to be aware of the additional tax and NI costs incurred.

Social events in particular could trigger a benefit in kind charge, leading to tax and NI liabilities. Employers considering such incentives must be aware of the need to possibly enter into a PAYE Settlement Agreement (PSA) with HMRC. This agreement allows tax and National Insurance contributions (NICs) to be settled on benefits that are minor, irregular, or impractical to process otherwise.

Nick says: “Employers need to budget for almost a ‘doubling’ of the original cost of the social event once the tax and NIC liabilities are considered.” There also are further considerations to be made for those organisations which agree to pay for all or part of an employee’s commute to the office.

You can read Nick’s comments in full via AAT Comment here.

Further guidance

While incentives can be an effective strategy to bring teams back together physically, they come with their own set of tax considerations. Organisations must plan these initiatives carefully to manage the additional financial burden effectively. For more detailed guidance on managing the tax implications of return-to-office incentives, please get in touch with Nick directly.

Nick Bustin

Employment Tax Director
+44 20 7969 5578
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