Guernsey Income Tax: Benefits in Kind Guide

Guernsey Benefits in Kind: A Comprehensive Guide

• What is Benefit in Kind
• Effect on Employers and Employees
• Exempt Benefits
• Taxable Benefits
• How the Benefits are Valued? 
  
  

What are Benefits in Kind?

Benefits in kind, also known as perks or fringe benefits, are non-cash advantages employees receive from their employers or another source due to their employment. These can be anything from free meals to company cars.

Taxing benefits ensures that all employees are treated equally regardless of how they receive their compensation (including benefits).

How does Benefits in Kind affect employers and employees? 

Employers: Employers are required to use the ETI system to handle taxes on all employee benefits. If an employee's salary isn't enough to cover the tax on a benefit, they must file a separate tax form with details by February 15th of the next year, showing the benefits. 

Employees: Everyone on the payroll, including company directors, needs to report all their income (including perks and benefits) and pay the correct taxes on them. This includes any benefits not already covered by the ETI system, which employees need to declare on their tax returns. This is because employees might receive taxable benefits their company doesn't know about, like a gift from a client.

Exempt Benefits : 

The following benefits are generally exempt from tax, up to certain limits:

1.  The first £900 worth of benefits you get from your employer (excluding cars, accommodation, and stock options).
2. Employer contributions to approved pension plans. (both company and personal plans approved by Guernsey law).
3. Mandatory social security contributions your employer pays for you.
4. Low-interest or interest-free loans from your employer (as long as the interest meets specific requirements).
5. Equipment, uniforms, and protective clothing are provided for your job (wearing a uniform to work is okay).
6. Food and drinks are provided in a staff canteen or from vending machines.
7. Medical or life insurance for business travel.
8. Free or subsidized parking (not at your home).
9. Bus passes for work or personal use.
10. Bicycles and e-bikes for work or personal use.
11. Mileage allowance for using your bike for work (following specific rules).
12. Business entertainment.
13. Training related to your current or future job.
14. Non-cash long service awards (£50 per year of service over 10 years).
15. Transportation to and from work for late-night shifts (between 10 pm and 6 am).
16. On-site childcare facilities (if available to all employees).
17. Meal vouchers up to £2.50 per workday (with limitations).
18. Reasonable moving expenses and a relocation allowance (up to £8750) for new hires moving to Guernsey.
19. Transportation to and from work for severely disabled employees.
20. Housing is provided by a religious organization for clergy members.
21. Medical screening programs are available to all employees who might benefit.
22. Group health insurance for you and your dependents (but not critical illness insurance).
23. Insurance protecting you from lawsuits related to your job duties.
24. Limited private use of a company car. 
25. Work-related newspapers and magazines.
26. Other minor benefits are simply a side effect of legitimate business expenses.

Taxable Benefits :

Generally, any perk you receive due to your job is considered taxable income unless specifically exempt. Here are some examples:

1. Using a company car for personal stuff
2.  Getting prizes or gifts (like from a suggestion box program)
3. Employer paying an employees personal bills (gas, electricity, etc.)
4. Employer providing food or a place to live
5. Getting free vacationsRegular clothes (not uniforms or safety gear)
6. Bonus prizes for good work (gift certificates, etc.)
7. Free services like travel on a shipping company
8. Having a personal helper paid for by your employer (cleaner, driver, etc.)
9. Individual health insurance coverage
10. Critical illness insurance coverage paid by your employer
11. Employer pension contributions over a certain amount (for directors and some employees)
12. Getting cheap loans or interest-free loans from your employer

It doesn't matter if you like the benefit or not, if your employer gives it to you because of your job and it's not on the "not taxable" list, you'll likely have to pay taxes on it.  But if they offer you something and you refuse it, you won't get taxed on it.

How is the Benefit Valued for Tax Purposes?

• Using company property (without buying it): You'll be taxed on 20% of the item's value at the beginning of the year, or when you first get to use it. There are specific rules for cars and housing. The benefit value for the use of a vehicle will cover depreciation, insurance, maintenance, servicing, repairs, and other running costs, of the vehicle
• Getting ownership of an item (except for things they sell): You'll be taxed on the item's market value at the time you receive it. For example, if your employer gives you a TV, you'll be taxed on its market value at that time.
• Getting a service they offer to customers: You'll be taxed on the average cost it takes the company to provide that service. Imagine a lawyer who works for a firm gets free help buying a house from their employer. The tax would be based on the cost of the lawyer's time, not the fee they would charge a client.
• Getting any other benefit: You'll be taxed on what it costs the company to provide it. This applies to anything not covered in the first three points.
  
  

For expert advice on managing Benefits in Kind and ensuring tax compliance, Contact Breaking the Mould Accounting Ltd. We can help you navigate the complexities of Benefits in Kind regulations and ensure your business operates efficiently.