BENEFITS IN KIND - 11.10.2021

Staff gym facilities - taxable benefit?

Gym memberships

If the business meets the cost of gym membership it can claim a tax deduction for the expense, but only where it counts as a benefit in kind . Usually, this means tax and NI is due on the value of the benefit. However, there’s a special exemption for “recreational benefits”. The bad news is that membership of a public gym fails one of the main conditions for the exemption.

Trap. Any corporation tax (CT) saving achieved by the company will be significantly reduced by the Class 1A NI liability it has on the taxable benefit in kind . For example, CT relief on an annual membership of £1,000 would be £190, while the Class 1A NI would be £138. Plus, there’s the tax on £1,000 to consider. Conversely, if the conditions for exemption are met there would be no tax or NI liabilities, while the company would still be entitled to the CT deduction.

Exemption conditions

The exemption applies where the company provides or makes available to a director or their family, recreational facilities and the following conditions are met:

Condition A. The facilities are available generally to all employees.

Condition B. The facilities are not available to members of the public generally.

Condition C. The facilities are used wholly or mainly by persons whose right to use them is employment-related. The effect of this condition is to limit the exemption to employees, former employees and the families of either.

Note. Condition B isn’t broken if the facilities are available to visiting workers from another business.

Trap. Even where the conditions are met some benefits are excluded. These include: those involving overnight accommodation; an interest in, or the use of, a mechanically propelled vehicle (including a mechanically propelled boat, ship or other vessel, aircraft or hovercraft); a facility that is available to the general public; or a facility that is not used mainly by persons whose right to use it derives from their employment (see The next step ).

DIY and rented gyms

The good news is that there are several ways to make use of the exemption for gym facilities, such as:

• create a gym on the business premises, say in a spare room, for use by all staff
• create a gym at a separate premises away from your business, e.g. in rented accommodation, if it’s not a residential property
• rent a public gym for a short period during which only company employees etc. could use.

Lowering the costs

The suggestions can be costly but there is a way around this. Tip. Sharing the cost and use of a gym or other recreational facility does not break the conditions of the exemption (specifically, condition B) but can make the arrangement more affordable. Ask other businesses in the area whether they would split the cost of creating and maintaining one. They might have space to accommodate it and with any luck showers too.

For the benefits in kind exclusions, visit https://www.tips-and-advice.co.uk , Download Zone, year 14, issue 01.