Iceland goes to Florida
A few weeks ago, I presented a seminar on benefits that can be given to employees free of tax and NIC and by coincidence, I found myself reading in The Times that Iceland (the supermarket chain, not the country) has run into trouble with the Taxman over just such an issue.
According to the story, Iceland took 800 of its managers on a 5 day trip to Florida at £5,000 a head, describing it as an opportunity for its managers to learn about customer service from Disney. Staff went to Disney theme parks, (where they had use of some of the rides opened solely for their use), Universal studios, the Kennedy space centre, saw an exclusive performance of the Lion King and were also treated to a fireworks display.
HMRC seem to think that this is a benefit and are asking for around £2.5m in tax and NIC while the head of Iceland is calling it an attack on fun.
Well, what’s the truth? Employers can send staff on courses and seminars if they are to enable the employee to be better at work and no benefit will arise. Courses directly related to the job are easy to defend (a course on taxing employee benefits for an accountant for example) and HMRC accepts that courses aimed more generally at
man-management or presentational speaking and so on can also be covered by the exemption.
Personally, I’m not sure how watching the Lion King makes anyone a better manager but of course I don’t know if there were any work related courses during the day. If there had been, then some evening entertainment might be OK but HMRC will look very closely at trips away where the itinerary consists mainly of social or leisure activities.
Two things occur to me. Firstly, in the ‘good old days’ when I was a Tax Inspector, we’d have probably done a ‘deal’. Some tax paid, some of the course costs allowed and perhaps a warning that if Iceland did it again they’d better have a lot more courses and a lot less fairground rides and fireworks. But of course, ‘deals’ are currently not an option with politicians criticising ‘cosy deals’ made by the taxman and so things seem to be all or nothing and much more likely to end up in Tribunal. I’m not sure that’s a good thing. Secondly, what advice did the management of Iceland get from their tax advisors before spending £2.5m on this trip? It could have saved a lot of hassle.
If you’re thinking of treating your employees, it’s worth having a chat with your Barnes Roffe LLP partner before you do!Talk to Barnes Roffe today