While benefits over and above standard salary – everything from travel passes and gym membership to employee share-option plans and pension schemes – can often be deciding factors in the decision to accept a job or not, it’s worth remembering that these extras are often subject to a benefit-in-kind (BIK) tax. It’s not always the best option for your pocket, therefore, to accept the benefit that is being offered.
Rory Meehan, tax partner with financial advisory firm FGS, advises job seekers to evaluate the overall job and look at each perk on its own merits.
He uses the example of a company car, which is quite a commonly offered benefit. If you have a €50,000 car, the full benefit-in-kind would be valued at 30pc (or up to 40pc depending on its vehicle emissions category) of that — €15,000 (based on 30pc). An individual who is taxed at the top rate of tax could end up paying about €7,500 on that car, he says.
On the other hand, that €7,500 BIK could pale in comparison to the loan payments for your own car, car tax, car insurance and petrol costs that you would incur during the year.
No benefits are mandatory, so you should only ever take the softer benefits if you are going to use them, he says.
“For example, a gym subscription has to be part of the person’s PAYE income and is treated like the cash was given to them. If the employee is assessing different jobs, it’s down to a personal lifestyle choice at that stage. Some people may never want to go near a gym.”
Benefits that don’t incur taxes
However, Meehan stresses that some perks do come without BIK tax. These include travel passes, health insurance, pension schemes and the bicycle. “Nor will you be taxed for your mobile phone, laptop or BlackBerry, for example, because their sole purpose is for work, and personal use is incidental,” he says.
Likewise, BIK is waived if an individual’s subscription to a professional organisation, which is necessary for their job, is paid by the employer.
“The other area that one would come across is the issue of credit cards. Some employers will provide employees with a business credit card — usually where the individual does a lot of travelling, be that for petrol, flights, hotel accommodation and so on. If it can be clearly shown that the expenses only relate to the business, then there should be no benefit charged to the individual. If it is a mixed bag, then the individual would be charged on the private benefit.”
Meehan adds, however, that employees will not have to pay any tax if they reimburse any personal payments to the employer.
It is worth keeping in mind that benefits don’t have to come in the form of tangible products, such as cars or gym memberships. Flexible-working hours, casual dress or extended holidays represent ‘free’ BIKs that can make all the difference to your work-life balance and can be just as attractive as the monetary benefits.