One of our shareholders owns a lodge in sunny climes and has offered an all expenses paid trip to the lodge for one member of staff + family each year. The receipient will probably be choosen at random. The cost of an equivalent break for a family of four is likely to be in the region of £8 - £10k - so it's a good offer. My question is, would the cost of the trip be taxable as a benefit in kind on the recipient?
The shareholder is the former owner of one of our suppliers in the same area and the person traveling would spend a day at the factory as well if that helps.
Thanks
Replies (7)
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Ask yourself the question
Is it by reason of the employment?
If the answer is in the affirmative then it's a benefit in kind.
Phil identifies the correct question. It makes no difference who makes the payment. The P11D explicitly captures benefits provided by 3rd parties, and they are treated no differently from benefits provided directly by the employer.
Presumably in a situation like this the employer will agree to pay the tax.
Why would the shareholder do this?
The perk is for employees of the company. Therefore it is by reason of the employment. There is no getting away from that.
It doen't matter that the company is not paying. Cf. holidays awarded by vehicle manufacturers to sales people who are employees of car dealers. You don't think that these are tax free surely?
Just to clarify
Not really relevent is it? They just do for reasons I am not going to expand on here.
The point that I was making is that prima facie the recipients get it by reason of their employment.
Hat off to Mr Kesby for a very full answer btw.
I agree with John and Phil
The other important point to note though is that it doesn't matter what the cost [to the family of four] of an equivalent break for a family of four is. All that matters is (subject to one issue) the cost to the person providing the benefit.
For the lodge itself, it's probable that an accommodation benefit arises in respect of the period that they use it. The other amounts are just benefits at their (VAT-inclusive) cost value.
If the cost to the person providing the gift (substituting the accommodation benefit charge for cost - possibly nil) is less than £250 per tax year, it may well be exempt under S. 324 ITEPA 2003, provided that the person providing it isn't connected with the employer. In this context, connected will mean that (together with associates) they have control of the company. See EIM21715.
It seems likely that the connection test will be breached or it will cost more than £250, but there's a possibility not, so seemed worth mentioning.