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Tax Benefits – Do We Care?


Does HMRC's attack on benefits in kind mean that for many employers they are more trouble than they are worth? Dan Martin, business writer on AccountingWEB, reports.

HMRC's quest to raise additional tax from drivers who have switched to using their own car for business purposes is viewed by critics as just another employee benefit which may soon disappear as bosses begin to view them as more trouble than they're worth.

This got us thinking about the benefits system as a whole. While many may bemoan issues such as the decline in company cars and the closure of the Home Computing Initiative (HCI), do modern employers and employees really care about what benefits are provided or at the end the day is more money to do their job all that people really want? We put that question to some of our members.

Benefits in kind

Since 1999, company car numbers have declined by 400,000 which has resulted in a visible loss of tax on the associated benefits in kind. The move by HMRC to potentially tax the new system reflects a desire to recoup the tax being lost to workers switching to initiatives like employee car ownership schemes (ECOS).

Marc Wilson, director of an IT consultancy firm, believes the Revenue's action is an attempt to "kill the golden goose". He suggests that continued steps of this sort will put people off from offering such benefits in the first place.

"Sooner or later, people will just give up and sit back, and go for an easier life."

Marc Wilson, AccountingWEB member

"The problem is that on one side they're trying to use taxation to influence behaviour, and when it works, there's suddenly a hole in the accounts so they try to tax the scheme that replaced what they were taxing before," he says.

"Sooner or later, people will just give up and sit back, and go for an easier life, rather than work harder and harder for a smaller and smaller slice."

Brian Gooch, from chartered accountancy firm Hawsons, disagrees.

"Benefits like ECOS and HCI have tended to be bought in as a package, rather than developed by individual employers," he says.

"As a firm, Hawsons not only ran a HCI scheme internally but implemented them for a number of clients. Consequently, I think that changes in the tax impact of such schemes will not have a significant effect in their take up by employers, provided they are still worthwhile."

Motivational benefits

Benefits and perks will always be a subjective issue. What motivates one person will not motivate another and it is this that many employers struggle with when putting together a benefits package.

John Genge, boss of consultancy firm Business Clinic, offers a good example. While working as a general manager for a Vauxhall car dealership, his bosses introduced an incentive scheme whereby for selling more cars employees could win a luxury trip to Florida. Did this motivate him? No.

He explains: "I worked out that for the money I could have had a better holiday with my family away from my 'peer group' so it absolutely de-motivated me and upset Vauxhall."

"Non-cash benefits, stability of company, style of management and opportunities for an employee to grow and develop are far better motivators."

John Genge, AccountingWEB member

John has some experience with benefits having written a range of client reports speculating on the various schemes and options available. From this, he reaches one conclusion: "Non-cash benefits, stability of company, style of management and opportunities for an employee to grow and develop are far better motivators.

All the members we questioned admitted that if they offered more money they would forgo benefits, non-cash or otherwise, suggesting that at the end of the day a good salary is what people really want.

However, what our members' opinions also showed was that it's not all about money. In these days of stressful working, what most people want is a good work/life balance.

Flexible working

'Work/life balance' is a watch phrase of the 21st century. As people work longer hours and travel further distances, maintaining a healthy equilibrium between work and family life is becoming all the more crucial. While all the members we questioned admitted they would forgo benefits in favour of being paid more, every one agreed that work flexibility is an increasingly important issue.

Brian Gooch says he recognises from speaking to contemporaries and contacts in the recruitment industry that accountants are increasingly valuing work/life balance benefits over anything else, an issue which will continue to become more important for employers.

"Personally I place high value on the fact that I can walk to work."

Brian Gooch, AccountingWEB member

"Personally I place high value on the fact that I can walk to work, and usually be home before 6pm to have tea with the family. These are important things that you can't buy," he says.

"As is often said, no-one ever sees their children grow up and says: 'I wish I'd spent more time at the office'!"

Marc Wilson believes it is an age issue. Once someone has enough to live on without fretting too much, he says, other factors start to dominate. "Many people would rather work a three-day week for 30K than a five-day one for 50K; especially those prudent souls in their 40s, with the end of the mortgage in sight and weariness with drudgery.

"Quite a few of my contemporaries are looking at the figures for retirement at 50."

Gerard Slater, commercial manager of technology company Cegelec, pointed out while flexible working works for a section of society, choice is key for all.

"Giving employees the option to make their choice is the key thing as long as the organisation has the flexibility to allow it to happen."

While working hours have increased over the past few decades, developments in technology have made home working easier. John Genge believes technology incentives are a major factor in motivating workers.

"If there was suddenly a seriously large incentive for people to work from home offices via broadband, video link and voice over IP systems, that would prove very popular and would also save quite a few community miles," he says.

"As IT becomes more sophisticated, there will be so many more office jobs that can be performed from a workstation in one's own home and the ability to have the best part of two hours of commuting per day added to your leisure time will be the greatest perk of them all!"


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