My company awards incentives to employees in the form of Argos Points. These may be exchanged for goods at any Argos store. The company has opted to pay the employees' PAYE and NI liability on each award under a PAYE Settlement Agreement (PSA).
There appears to be confusion within HMR&C and our own tax advisers regarding the method of assessing the benefit.
One point has an exchange value of £1 worth of goods. The company buys 100 points at a discount from Argos at say £92 + VAT = £108.10. Only part of the VAT incurred is reclaimable as VAT Input tax.
So, in calculating the benefit to be assessed to PAYE/NI, is it:
1. The value of the benefit to the employee - £100
2. The gross cost to the employer of providing the benefit - £108.10
3. The net cost to the employer of providing the benefit - £92
4. The gross cost of £108.10 less the VAT Input tax actually reclaimed - say £102.
I fail to see how the benefit can be valued at a figure higher than that enjoyed by the employee, i.e. £100, but HMR&C say it should be the £108.10.
Does anyone have a view please - or a link to the definitive answer on the HMRC website please?
Many thanks
Roger N
Replies (3)
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What's the benefit of Argos Points?
I agree with Sarah. We buy supermarket vouchers for our employees at Christmas (at a discount) and the PSA value is the net price we pay - there is no VAT involved.
I agree with Phil
It's the cost to the employer inclusive of VAT, whether or not the VAT can be recovered.
I assume the logic is that the BIK is the same regardless of your employer's VAT recovery position.
Value of benefits
Roger,
I would expect the total cost to the employer to be the value of the benefits for PSA purposes, in line with the general rule for finding the cash equivalent of benefits (Section 203 (2) ITEPA 2003).
So in your case I am afraid I would agree with HMRC that the £108.10 is the figure to use in calculating the PSA liability, I can't see how you can argue using a lower figure in this case.
Phil