Staying Fit For Work!

Sarah Bradford takes a look at how the tax system can help employers to encourage employees to stay fit for work.

The benefits of physical activity are undisputed, and staying fit and healthy is in the interests of both employees and employers. The two leading causes of workplace absence are back injuries and stress, depression or anxiety. In 2016/17, 1.3 million workers suffered from work-related ill-health, resulting in the loss of 25.7 million working days – and an estimated cost of £522 per employee. 

Many workers are physically inactive and struggle to fit physical activity into their working day. The tax system can help employers to help employees get fit, as it contains a number of health and fitness related tax-breaks.

Employees need to get to and from work, and this provides an opportunity for physical activity. The tax system recognised this with the introduction of the cycle to work scheme in 1999. 

Employers are able to loan employees a bicycle and/or associated safety equipment, such as a helmet or reflective clothing, without triggering a benefit-in-kind tax charge, if certain conditions are met.

The first condition is that there is no transfer of the property in the cycle or equipment in question. The bicycle and equipment must be loaned rather than given to the employee.

The second condition is that the employee uses the cycle and equipment mainly for qualifying journeys. Qualifying journeys are those between home and work, and also between different workplaces. Thus, the cycle cannot be used predominantly for leisure cycling. The use of the bicycle for leisure cycling or by members of the employee’s family is not prohibited, but for the exemption to apply this cannot be its main use.

HMRC do not expect detailed records of mileage or time spent cycling to be kept and will accept that this condition is met unless there is clear evidence to suggest that less than half of the use of the cycle or equipment is on qualifying journeys.

The final condition is that the opportunity to benefit from the loan of a bicycle and associated equipment is available generally to all employees. There is, however, no requirement that employees have a dedicated bicycle for personal use, so the employer could, for example, have a pool of bicycles available for employees to borrow. However, for HMRC to accept that the ’all employee’ condition is met, the pool must be such that it ensures genuine availability for those employees who wish to use a bicycle.

Employers can continue to use salary sacrifice schemes to make loaned bicycles available to employees. The alternative valuation rules applicable where benefits are made available under optional remuneration arrangements, such as salary sacrifice arrangements, do not apply to the provision of bicycles and cyclists’ safety equipment. Thus, where provision is made in this way, as long as the associated conditions are met, the exemption remains intact. 

The bike can be sold to the employee at the end of the loan period without triggering a tax charge, as long as the employee pays the current market value for the bike. See HMRC’s Employment Income Manual at EIM21667A for a simplified valuation approach.

Where sporting facilities are available on site, employees are more likely to make use of them, whether before or after work or during their lunchbreak. Where an employer provides sporting or recreational facilities for employees, there is no benefit-in-kind tax charge, as long as:

For the purposes of the final condition, the right to use the facilities is employment-related if it arises as a result of the person being an employee or former employee or a member of their family or household. 

This exemption is limited to sporting and recreational facilities provided by the employer for staff and their families. While it may be feasible for larger organisations to provide, say, an in-house gym for their employees, for smaller employers this is unlikely to be financially viable. However, employers can group together to provide facilities for their employees and still benefit from the exemption. So, for example, employers on an industrial estate could join forces to provide a gym for employees working on that industrial estate; as long as the associated conditions are met, the exemption will apply.

However, unlike cycle to work schemes, a salary sacrifice scheme cannot be used to take advantage of the exemption; the alternative valuation rules bite and the benefit of the exemption is lost.

While there is no tax charge on the provision of workplace facilities if the associated conditions are met, if the employer pays for the employees to have, say, fitness classes at the workplace gym, a taxable benefit will arise on the cost of the classes.

Where it is feasible for an employer to provide workplace sporting facilities, the employer may instead provide employees with membership at a local gym or sports club. Although the outcome is similar in that employees get to use sports facilities paid for by the employer, the tax position is very different. 

The exemption does not extend to membership of facilities available for use by the public, and where the employer either provides an employee with membership or pays the employee’s subscription on his or her behalf, the employee will suffer a tax charge. If the employer pays the membership direct to the gym or sports club, a benefit-in-kind tax charge arises; if the employer gives the employee the money to pay the membership, this is treated as extra salary and liable to PAYE and National Insurance contributions.

However, employers may be able to help employees meet the cost by securing a corporate discount with the gym or sporting club, thereby reducing the cost to the employee of using the facility. 

The tax system also provides exemptions for certain medical benefits to help employees stay fit and, if they have time off work due to sickness or injury, to help them to return to work more quickly.

To help identify potential health problems early (and hopefully nip them in the bud), employees can benefit from one employer-provided health screening assessment and one medical check-up tax-free each year. For these purposes, a health-screening assessment is an assessment to identify employees who might be at particular risk of ill health, and a medical check-up is a physical examination of the employee by a health professional solely for determining the employee’s state of health. Investing in health-screening and medical check-ups may prove cost-effective in reducing the number of days lost due to ill-health.

Where an employee has been off work due to injury or ill-health, the employer can meet the cost of recommended medical treatment (up to a limit of £500 per tax year) without the employee suffering a tax charge. Medical treatment is ’recommended’ if it is provided to the employer in accordance with a recommendation, which is made as part of occupational health services provided to the employer by a service under the Employment and Training Act 1973 for the purposes of assisting employees to retain employment or under arrangements made by the employer, and the purpose of the medical treatment is to assist the employee in returning to work after a period of absence due to injury or ill health. If the cost of the recommended medical treatment exceeds £500, the excess over £500 is taxable.

Where an eye test is required in accordance with regulations made under the Health and Safety at Work Act 1974, there is no benefit-in-kind tax charge in respect of the provision by the employer of such an eye test or, where the test reveals it to be necessary, the provision of glasses or other corrective appliances. 

The tax system provides some opportunities to help workers remain fit and healthy. A culture that encourages workers to take care of their health will benefit both the employees and the employer and increase productivity and well-being.