Staff who pay for canteen meals using swipe cards credited with cash could find themselves being targeted by the tax man, a top business adviser has warned.
HM Revenue & Customs (HMRC) is considering taxing subsidised meals provided by employers to staff where the system used to administer the meals involves swipe cards credited with cash by the employer, according to business advisory firm Wilkins Kennedy.
Free or subsidised meals are commonly used by organisations as a perk and are normally a tax-free benefit. Employers use swipe cards system to make administration simpler and allow monitoring of consumption.
However, a recent HMRC statement said: “Employers should treat amounts credited to canteen accounts as earnings for the purposes of PAYE and Class 1 National Insurance contributions.”
Roger Williams, partner at Wilkins Kennedy, said that HMRC seemed to view swipe card systems, where cash is credited by employers, as a form of ‘salary sacrifice’ and, therefore, as taxable. If employees simply helped themselves from staff restaurants, or used tokens to purchase food, they would still qualify for an exemption.
Williams warned that the tax man may be able to claim six years worth of backdated tax and National Insurance from staff if it successfully challenges these arrangements.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
“Employees could be hit with a sizeable retrospective tax bill if these arrangements are challenged. For employers, replacing these systems will be enormously costly and create a lot of needless red tape,” he said.
“HMRC’s objection seems to be that employees are being given cash to buy food, rather than a token or simply free food itself, but the cash on the swipe card can only be used to purchase meals in the workplace, so the distinction seems a little spurious.”
