Perk up your people

A good medical secretary is highly valued and most consultants will try their darnedest to retain one.

At a time when there is an acute skills shortage, retaining key staff is extremely difficult. But one of the ways to do it is by offering tax-free perks, which are tax efficient both for the employer and employee.

Over the last few years, the number of tax-free perks available have been steadily eroded. In this article I will concentrate on the most popular ones.

Childcare vouchers

With effect from the beginning of the current tax year, consultants can provide their secretary with child care vouchers of up to £50 per week, free of tax and national insurance.

To qualify for the tax break, two conditions must be met:

Vouchers must be generally available to all employees. Most consultants should be able to meet this requirement.
Employees can only use the vouchers to pay for childcare that has been registered or approved by the relevant statutory body. This would include childminders, nurseries, play schemes and nannies. Of particular relevance to many consultants is the fact that nannies or au pairs are eligible to apply for approved status.

Salary sacrifice schemes

Childcare vouchers can be provided as part of a salary sacrifice scheme whereby the secretary may elect to substitute part of her salary for vouchers. This non-cash benefit is free of tax and national insurance, benefiting both employee and employer. The box below illustrates such a scheme.

Salary sacrifice schemes are a well-established means of remu¬neration and are generally accepted by the taxman. However, consultants and their staff who are proposing to enter into such arrangements should take legal or professional advice as they do represent a change in the conditions of employment.

Key benefits are as follows:

Medical secretaries electing to take £50 per week child care vouchers instead of salary will save between £850 for a basic-rate taxpayer and £1,066 for a higher-rate taxpayer.
Consultants do not pay employer's national insurance on the childcare vouchers - a saving of £300 per employee.
The £50-a-week limit applies to each employee. It is not affected by the number of children and can be claimed by both the father and the mother.

Mobile phones

This must be the ultimate employee perk - tax-free and with no limit.

Somewhat illogically (but since when has tax been logical?), provision of a mobile phone by a consultant for his secretary is specifically exempt from tax and national insurance.

This exemption extends to the provision of a mobile phone for any member of the employee's family - husband, wife and kids. Why not consider buying mobile phones for all the family?

On a more serious note, you must ensure that it is a contract mobile phone and not the type that requires top-up cards.

The contract must be in your name as the employer. Under no circumstances can the contract be in the employee's name or you will completely negate the tax-free benefit. Be warned.

Computer equipment

Where an employer provides a computer or related equipment such as printers, scanners and peripheral devices for an employee's personal use, this is deemed to be a tax-free benefit when:

The value of the computer equipment is up to £2,500, or
Where the employer leases the equipment, the lease cost is not more than £500 a year.

The equipment must be loaned to the employee - transfer of ownership is not exempt from tax.

On a final note, it would be perfectly possible to introduce a salary sacrifice scheme for mobile phones and computer equipment.

HOW IT WORKS

A secretary earns £28,000 a year on which she pays income tax and national insurance.
She pays for childcare out of her net, after-tax, salary.
If her consultant boss introduced a salary sacrifice scheme, she would benefit to the tune of £858 a year:

	BEFORE	AFTER
Cash salary	£28,000	£25,400
Childcare vouchers	-	£2,600
Total salary package	£28,000	£28,000
Tax and NI	£7,380	£6,522
Net pay	£20,620	£21,478
Less: Childcare	£2,600	£2,600
Net disposable income	£18,020	£18,878
ANNUAL SAVING		£858

This assumes the secretary is a basic-rate taxpayer. For a higher-rate taxpayer the savings will amount to £1,066 per year.

Willie MacKenzie is a chartered accountant and tax adviser specialising in hospital consultants. He can be contacted on 01483 419922, by email at wtm@accmac.plus.com or visit www.wesaveutax.co.uk