One in 10 employers’ flexible benefits schemes may not have been verified with Her Majesty’s Revenue and Customs (HMRC).
A survey of 120 organisations offering flexible benefits, by HR consultants Hewitt Associates, found 10% of respondents had not secured endorsement from HMRC. Not to do so could spell tax trouble, said Hewitt’s head of reward consulting Martha How.
“We were very surprised to see that one in 10 schemes have still not gained formal approval. This is much higher than expected. By operating a flexible benefits scheme without HMRC agreement on benefits tax treatment, companies are risking a potentially lengthy and painful investigation, which could result in penalties including back payment of taxes.
“We urge these companies to seek immediate approval. Companies that already have approval need to keep a close eye on changes to legislation to ensure their schemes remain compliant.”
Hewitt’s survey found that childcare vouchers are the most popular benefit and are offered by 98% of flexible benefits schemes. Next is dental insurance, provided by 92% of flex schemes, and third is cycle to work, offered by 91%.
Permanent health insurance is offered by 67% of flex schemes compared to 23% in 2007-08. Health screenings, which were offered by 56% of flex plans in 2007-08, are now offered by 56%.
How said: “Childcare benefits top the list, but their tax-free status is under threat. Reducing or scrapping tax relief on these will have a major knock-on effect, particularly for employees that rely on the tax benefits they have through childcare vouchers to secure a means of returning to work while caring for the family.
“After 2015, a 40% rate tax-paying couple taking childcare vouchers will be £2,392 a year worse off and a basic rate tax-paying couple will be £1,808 worse off.”
A petition against the scrapping of tax relief on childcare vouchers is on the Downing Street website. More than 44,000 people have added their support since Gordon Brown said tax relief would be scrapped in 2015.
Simon Moore, managing director of Computershare Voucher Services (which took over Busy Bees), said: “The outrage that has greeted the prime minister’s announcement has been phenomenal.”