Q&A Friday! What are the VAT implications if I offer my staff benefits?

Q&A Friday! What are the VAT implications if I offer my staff benefits?  I run a small business with staff and i'm keen to start offering benefits but would like to understand the VAT implications of doing so?  For example, gym memberships and subsided meals?

As you may already know, employee benefits are a legitimate business expense, as long as they are clearly offered to reward and motivate staff.In terms of the VAT implications of offering your staff benefits, HMRC advises that as long as the benefits are provided to all employees and strictly for the purpose of the business, then no VAT is charged.

When am I liable for VAT on staff benefits?

If you provide staff perks on an individual basis, there will be a VAT output charge to reflect the private use element of the benefit provided.For example, if you offer particular staff free gym membership or access to any recreational or sporting facilities, input VAT will be incurred.

What about subsidised meals?

With regard to staff meals, if you offer to pay for an employee meal, snack or drink, the value of the supply is zero and no VAT is due.If, however, you offer cash for staff to buy a meal, snack or drink, it is a standard  20% VAT charge and the value of the perk is based on the amount of cash paid.So it is important to provide the meal itself to staff rather than the cash equivalent.Please get in touch if you have any questions around your VAT position.