Joe Brough looks at benefits-in-kind commonly provided to directors of owner-managed companies, considers whether these are still beneficial, and outlines traps to avoid.
There is scope for directors of owner-managed companies to maximise their remuneration package in a tax-efficient way by utilising benefits-in-kind (i.e., goods or services provided by the company either for free or at a reduced cost). Generally, the cost of providing a benefit is a tax-deductible expense for the company as a cost of employment, whilst the benefit can be either taxable or exempt for the director.
For taxable benefits, a cost-benefit analysis should be performed before the benefit is provided. For benefits such as the provision of a company car, there can be a tax mismatch between the corporation tax deduction and the taxable benefit for the director. Where possible, the company should provide exempt benefits to ensure maximum tax-efficiency. <
