· Features

Tax-efficient ways to get workers fighting fit

We all know that a healthier workforce is a more productive workforce. As well as generating a greater output in the working day, healthy employees should have fewer days off work.

The government recognises these benefits and has introduced tax breaks to promote good health. For example, subject to certain qualifying conditions, employers can provide free medical check-ups and eye tests. And since 1 January 2015, they have been able to contribute up to £500 a year for rehabilitation treatment to help an employee return to work after an injury or illness.

However, some employers want to go beyond basic health benefits and encourage a fitness regime among their workers. In this respect, the biggest tax break is the cycle-to-work scheme.

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More cycle lanes and Britain’s success in international competitions have made cycling particularly popular over the past few years. If introduced correctly, a cycle-to-work scheme can save employees up to 42% of the cost of a bicycle. The employer also benefits in cash terms through a saving in National Insurance costs.

Other fitness options such as free gym membership create a taxable benefit in kind. Despite this there are still financial advantages to providing these benefits as employers can often secure preferential prices. For example, a company might negotiate gym membership at a group rate of £20 a month, whereas an individual may be quoted £40 a month. Although there are no tax advantages, these are clearly worthwhile savings.

The best time to look out for such deals is when a new gym opens, as it needs to fill places quickly so will be prepared to offer good discounts. This is a taxable benefit if the employee does not pay the cost of the gym. However, some companies split the fee so that the employer subsidises the membership and the employee has a reduced benefit in kind.

An employer can also provide a sports facility for the benefit of all staff and their families and, as long as these meet the conditions, no taxable benefits apply. Sadly these facilities are generally only present in larger companies. 

Another option is supplying healthy lunches. A qualifying workplace canteen can provide free or subsidised meals tax-free, and the employer can encourage healthy eating by limiting the menu. While these facilities may be unrealistic for smaller organisations, there is still the opportunity to provide free meals, albeit with a taxable benefit. As with the gym membership, it might be possible for a business to use its purchasing power to secure a discount from a catering contractor.

The same applies to wellbeing programmes. Some companies provide massage therapists to do a session when people need treatment. This would also be a taxable benefit if the employer pays, but you could secure a good price for booking someone to do the whole day, rather than have individuals arranging their own treatment.

If the employer wanted to provide such ad-hoc benefits free to staff, this could be covered by a PAYE settlement agreement. It would encourage employees to use the service and avoid the extra administration of submitting P11Ds.

Finally, if businesses really want to encourage fitness and the wider benefits of employee engagement, they could combine it with charitable fundraising. For example, a group from our office is taking part in a charity cycling tour of Normandy. We are paying for our own accommodation, ferry and equipment, so there are no tax complications. The event promises to be fantastic – with loads of benefits in terms of fitness, team building and charitable giving.

Andy Brookes is senior manager, employer solutions at Menzies, a chartered accountants