Is it worth running benefits through own company from a tax perspective?

[MEAVO]

Hi there

I own a limited company and I was wondering if anyone can shed some light on the advantages of running some benefits through the company, for example private health care or a gym membership. As far as I can see it makes little difference to my bottom line whether the company pays or if I pay on my own post-tax? The former actually being worse?

The upside of paying through the company:

• Reduces corporation tax (25%)
• I'm paying pre-tax (personal / self-assessment)

However, there are several downsides:

• The company pays around 13% National Insurance Contribution tax on the benefit
• I also pay 20% tax on the benefit (P11D)
• Then my low tax allowance on dividends is reduced by the amount of the benefit received, leading to another 25% tax hit (so says my accountant)
• There is no upside with regards to claiming back VAT (not sure you are allowed to even do this for personal benefits) as things like private health care have no VAT

Am I missing something? Why would anyone run any benefits through your company if you're worse off?

Thanks!

 

[MyAccountantOnline]

Hi there

I own a limited company and I was wondering if anyone can shed some light on the advantages of running some benefits through the company, for example private health care or a gym membership. As far as I can see it makes little difference to my bottom line whether the company pays or if I pay on my own post-tax? The former actually being worse?

The upside of paying through the company:

• Reduces corporation tax (25%)
• I'm paying pre-tax (personal / self-assessment)

However, there are several downsides:

• The company pays around 13% National Insurance Contribution tax on the benefit
• I also pay 20% tax on the benefit (P11D)
• Then my low tax allowance on dividends is reduced by the amount of the benefit received, leading to another 25% tax hit (so says my accountant)
• There is no upside with regards to claiming back VAT (not sure you are allowed to even do this for personal benefits) as things like private health care have no VAT

Am I missing something? Why would anyone run any benefits through your company if you're worse off?

Thanks!

It depends on many factors including what the benefit is and the recipients circumstances.

What you need to do is look at each potential benefit as you've done.

This is a useful guide when looking at benefits - https://www.gov.uk/expenses-and-benefits-a-to-z

 

[UK Contractor Accountant]

Christmas parties, health screenings, medical checkups, providing exercise equipment for the employees to use, trivial benefits (£300 p/y max), employer pension contributions, life insurance, classic cars with mv<£15K

 

[HFE Signs]

Is this something you're planning to offer to all staff or just directors? Obviously offering rewards and perks to staff has many advantages but comes with a cost.

We tend to favor performance related incentives so there is a mutual benefit.

 

[WaveJumper]

Classic case of one to run by your accountant, as above though are you thinking of offering this to all staff, only corporate benefits I ever like was, car allowance, private healthcare for myself and family, plus of course a bonus based on meeting targets etc.

As you have already highlighted, these can be nice but HMRC do like to clobber you on BIC