As an employer, you will likely face the delicate situation of employees asking for pay rises.

With the cost-of-living crisis and rise in inflation, these requests will have become more frequent as people look to keep up with spiralling living costs.

Each month, the Office for National Statistics (ONS) surveys collect the salaries of 12.8 million workers to produce the median salary for the UK.

The latest data from the ONS indicates that the median average salary is estimated to be £31,772.

However, how much a person earns often depends on their age, skill and where they live.

When it comes to pay rise requests, employers need to tread a thin line between granting requests and retaining talented staff you cannot afford to lose, while keeping an eye on employment costs in what is still a tough financial climate.

Handling these situations correctly and professionally is crucial to keeping employee morale high and your business running smoothly.

Encourage open communication

Asking for a pay rise can be an awkward, uncomfortable experience for employees, so it is important to make employees feel comfortable discussing their salary expectations.

Encourage open and honest discussions about pay and make it a regular part of performance reviews.

This helps to prevent surprises and ensures that both parties have a clear understanding of the expectations.

Align pay with performance and evaluate requests objectively

Regularly evaluate your employees’ performances, acknowledge their accomplishments, and align their pay accordingly.

This approach encourages productivity and gives employees a clear understanding of how they can increase their earnings.

When requests for pay rises are made, objectively evaluate the requests based on performance and the last time the employee was given a pay rise. Try and avoid an instant response that may not be in line with objective thinking.

Consider the business’s financial position

While it is important to reward deserving employees, you must also consider your business’s financial situation.

Can your business afford the requested pay rise? If not, it’s important to communicate this openly to the employee while also discussing potential prospects.

It is better to delay a pay rise than to overstretch your finances and potentially jeopardise your business.

Consider alternatives

If a pay rise is not feasible, consider other alternatives. This could include additional benefits such as more flexible working hours, opportunities for training and development, or an enhanced bonus scheme.

Sometimes, non-monetary rewards can be just as effective in demonstrating that you value your employees.

Communicate your decision clearly

Once you have made your decision, communicate it clearly and respectfully. If you approve the pay rise, be sure to highlight the employee’s achievements and contributions. If you decline, explain your reasons, and provide constructive feedback on what the employee can do to improve their chances of a pay rise in the future.

All pay rise requests should be dealt with fairly and consistently. Inconsistent treatment can lead to discontent within the workforce and possible breaches of UK employment laws.

Are you unsure about how to deal with a pay rise request, or have other remuneration questions? Contact us today.

In the Spring 2023 Budget, the Government laid out plans to shake up the current free childcare system – but many higher earners will be disappointed to find that the changes keep them excluded from the scheme.

The existing childcare rules mean that parents are eligible for up to 30 hours of free childcare if their children are aged three to four.

Eligibility also depends on if you are employed or self-employed, the number of hours you work, and your income.

If you or your partner have an expected adjusted net income of over £100,000 in the current tax year, you will not be eligible.

The changes, which will be staggered over the next couple of years, will see many families in the UK benefit from free childcare at an earlier age, however, the £100,000 annual income cap will remain.

Timeline of changes

• April 2024 – Working parents of two-year-olds will be able to access 15 hours of free childcare per week.
• September 2024 – Children from the age of nine months will be eligible for 15 hours per week of free childcare.
• September 2025 – Working parents of children under the age of five will be entitled to 30 hours of free childcare per week.

The changes will be welcomed by many adults in the UK who will be able to return to work at a much earlier date.

However, higher earners will not see this benefit due to the income restrictions, which have not changed.

If you’d like more advice on the current childcare rules or want more information on the upcoming changes, please contact us.

It is important for employees to feel valued in the workplace. A lot of the time, it is the little things that employers can provide to their staff that have the most substantial impact.

One such ‘little thing’ is the concept of trivial benefits in kind. Trivial benefits are best described as small ‘token gifts’ that are given to staff by their employers.

Trivial benefits include such things as chocolates, wine, gift vouchers, tickets to the theatre, or a team outing for lunch or dinner.

These gifts meet the trivial benefit criteria as long as:

• The gift is worth £50 or less
• The gift is not cash
• It isn’t a reward for work or performance
• It isn’t in the terms of an employee’s contract

The main distinction of trivial benefits in kind is that they should not add value to an employee’s salary. They can also not be given in lieu of payment.

Advantages of trivial benefits in kind

As well as the boost to employee wellness and morale, trivial benefits in kind also provide tax advantages for employers.

Below are the benefits and reasons for employers to consider adding trivial benefits in kind to their working culture.

Improved employee morale and engagement 

Regular trivial benefits serve as consistent reminders to employees that they are appreciated. These small gestures can significantly boost morale, leading to increased job satisfaction and productivity.

When employees feel valued, they are more likely to engage with their work actively and maintain a positive attitude towards their employers and the business in general.

Enhancing employer’s reputation

Providing trivial benefits can positively impact an organisation’s reputation, helping it to stand out as an employer that cares about its employees’ well-being.

This increased employer branding can be instrumental in attracting and retaining top talent in the competitive job market.

Tax benefits

From a purely financial perspective, trivial benefits in kind are exempt from tax, National Insurance, and reporting to HMRC. This tax efficiency makes trivial benefits a cost-effective way for employers to reward their staff.

However, if benefits are part of a salary sacrifice arrangement, then they won’t be exempt from tax and will need to be reported on a P11D form.

Employee wellness

Trivial benefits can also contribute to the overall wellness of employees. For instance, offering a yoga class or a fitness tracker can encourage employees to take care of their physical health. Similarly, gifting a book or sponsoring a hobby class can contribute to mental wellness.

A healthy employee, both physically and mentally, is likely to be more productive and less prone to taking sick leave.

The cost to the business is relatively small and is tax-exempt, so it is well worth considering if you haven’t already done so.

For more information on trivial benefits in kind, contact us today.

The 2020/21 tax year saw 1.4 million people charged interest on overdue tax payments – a 15 per cent increase on pre-pandemic figures.

The data was released after a Freedom of Information request by investment platform, AJ Bell, but this did not disclose how much money HM Revenue & Customs (HMRC) raised from these late payment penalties.

The increase came despite a drop in how much money many would have owed HMRC due to furlough during the pandemic and corporate dividend cuts.

Number of taxpayers facing penalties is predicted to increase

The overall amount of people paying late payment charges on missed tax deadlines is predicted to rise.

By the 2024/25 tax year, the number of people HMRC estimate to be paying dividend tax and Capital Gains Tax will increase to 2 million.

This increase means there is a far greater chance that hundreds of thousands more taxpayers could face late payment charges, based on the current proportion of those missing the deadlines.

Late payment interest rate increases

With more and more people having to pay penalties for overdue tax payments, it will not be of great comfort for many to learn that the interest rates on these charges have increased.

As of 31 May 2023, the interest rates on late tax payments rose from 6.75 per cent to 7 per cent.

It is important to note that HMRC will align future hikes to these interest rates with the base rate set by the Bank of England.

This base rate has rocketed in the past 12 months as the Government attempts to stem inflation, and it is predicted that it will continue to rise in the coming months.

This will in turn mean that late tax payment interest rates will increase. This should stand as a warning to UK taxpayers to ensure that their taxes are filed and paid on time.

If you’d like advice on how to submit your tax returns on time, please contact us.

With a growing number of company car owners using electric vehicles, many are deciding or being permitted to use company credit cards to pay for roadside charging.

However, what are the implications of this for the employee and business alike?

While the answer is fairly technical, the short simple answer is there will be no taxable benefit on the employee and no National Insurance Contribution (NIC) charge.

This is because a credit card is a credit token, not a specific means or facility for providing the electricity to charge the vehicle, and it is, therefore, exempt under Section 269 of ITEPA (Income Tax (Earnings and Pension) Act) 2003.

At the moment, electricity is not a fuel for fuel benefit purposes either, this further prevents there being a benefit under ITEPA.

To make matters more complex, this should not be confused with the provision of electricity by an employer via a workplace charging point, which is also exempt from a Benefit in Kind charge under a different section of the same Act, which accounts for the facilitation of electric charging under the fuel benefit rules.

When it comes to the NIC, a liability for Class 1 contributions exists where the credit card is paying liabilities for the benefit of the earner.

However, this is counteracted by other legislation that ensures that no Class 1 NIC arises on business expenses or where “a strange pre-purchase performance is given by the employee whereby the employee informs the seller that they are purchasing the goods or services on behalf of their employer.”

Confusing and seemingly contradictory, this has been established in prior case law, which found that when informing the seller that the fuel is being acquired on behalf of the employer, implies a shift in the purchasing dynamic.

Instead of personally buying the fuel, the employee assumes the role of an agent for the employer.

By procuring the electricity on the company’s behalf, they are no longer utilising the corporate credit card to settle a personal responsibility. Rather, they are being supplied with fuel by their employer.

This area of tax and National Insurance legislation is constantly changing and so if you have any queries about the potential charges related to company cars or their “refuelling” it is best to seek professional advice. To find out how we can support you with this, please contact us.

There have been several important tax decisions previously regarding the difference between vans and cars, but how do the different rules regarding electric vans affect their tax treatment?

Let’s use a hypothetical:

A Ltd has acquired a new electric company van that its director, Bob, uses to go to and from work, as well as during the regular workday.

However, Bob also has the van in the evening and at the weekend for his private use. For Benefit in Kind (BiK) purposes, the company classes the vehicle as an electric van.

Unlike company cars, the BiK charge for an electric van is nil. Therefore, employees with electric company vans can, where permitted to do so by their employer, use their company van for unrestricted private use without any associated tax charge.

Unfortunately, HMRC disagrees with this judgement and argues that the van, is in fact, an electric car and not a “goods vehicle”, as defined by Section 115 ITEPA (Income Tax (Earnings and Pension) Act) 2003.

This states:
(1) In this Chapter— “car” means a mechanically propelled road vehicle which is not:
(a) a goods vehicle,
(b) a motorcycle,
(c) an invalid carriage, or
(d) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used;
“van” means a mechanically propelled road vehicle which:
(a) is a goods vehicle, and
(b) has a design weight not exceeding 3,500 kilograms, and which is not a motorcycle.
(2) For the purposes of subsection (1)…
“goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description;

In reaching such a decision, HMRC would need to prove that the van in question had multiple purposes, beyond just the transport of goods.

Many modern vans have been designed and are advertised as multipurpose vehicles, and there are a number on the market that have crew cabs or “kombi” roles, that allow for passengers as well as goods.

This confusing situation has been tested many times, not least in the case of Payne, C Garbett, Coca-Cola European Partners GB Ltd v HMRC at the Court of Appeal on 20 July 2020.

In this case, HMRC was able to prove that the VW Transporter T5 Kombi and Vauxhall Vivaro vehicles provided by Coca-Cola to employees were not vans, and instead served the purpose of being a car.

Examples and cases such as this can make it difficult for companies to find the most tax-efficient fleet of vehicles and can make the choice of vans and cars more complicated.

If you are looking to purchase new vehicles for your business, it is important to seek expert advice. Contact us to find out more.