Disabled employees
You’ve taken on a new employee who is disabled. They’ve told you that there are some tax breaks available to both of you. What’s the full story here, and how can you take full advantage?
Equipment and services
Disabled. For the purposes of tax, a disabled employee is one who has “a physical or mental impairment with a substantial and long-term adverse effect on the employee’s ability to carry out day-to-day activities”.If your employee is classed as disabled, there are exemptions that can be utilised to help them in the workplace and in getting to it. These range from providing specially adapted equipment to transport for home-to-work travel.
Equipment. A disabled employee isn’t liable to tax on the private use of equipment, services or facilities that are provided by you to enable them to take up work.
For the exemption to apply, certain conditions must be met. These include that; (1) the main purpose of providing the equipment is to enable the employee to perform the duties of the employment; (2) the benefit is provided under, or within, the terms of the provisions of the Disability Discrimination Act 1995, the Access to Work programme, or any other statutory provision or arrangement, whether or not the employer has any legal duty to provide the benefit; and (3) this type of equipment is made available to all disabled employees.
Warning. Excluded are boats, aircraft and the extension, conversion or alteration of living accommodation. Just as well from a cost point of view.
Home to work travel
Unique. Normally a tax charge arises where an employer provides home-to-work travel for an employee. However, disabled employees are a special case. This tax exemption enables an employer to provide transport for a disabled employee for the home-to-work journey, or a journey that is substantially the same as that journey, or to pay or reimburse the expenses incurred on such transport without triggering a tax charge (s.246 Income Tax Earnings and Pensions Act 2003).
Tip. You can provide transport for home-to-work travel or meet the costs of such transport tax-free, both for you and your employee. So suggest to the employee a salary sacrifice arrangement to enable them to take advantage of the exemption without increasing the cost to you of paying for the transport.
Employer-provided cars
Company car. You can also provide a car for use by the disabled employee without triggering a tax bill (under the company car tax and car fuel rules).
However, the conditions are stringent and limit the usefulness of the exemption. The conditions are that the car; (1) has to have been adapted for the employee’s special needs (and/or is an automatic car); (2) is made available on terms that prohibit its use other than for business travel; and (3) is only actually used in accordance with the terms imposed by condition (2).
Trap. Any private use of the car other than for home-to-work travel will trigger a tax charge under the company car tax rules. As it’s unlikely that an employee won’t need a car for other private purposes, this exemption could be of limited use.
Tip. Of course if the employee had one car for work and another for private journeys that would be another matter.
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