As an employer, if you provide fringe benefits to employees, or others associated with your business, you must generally pay fringe benefit tax (FBT) on the value of these benefits.
So, when are you liable for FBT? Any time you provide non-cash benefits to your staff. The list is potentially endless but in practice, most non-cash benefits fall into one of these categories:
- motor vehicles
- subsidised transport
- staff vouchers/gifts
- offsite carparks
- insurance premiums
Of these, most FBT revolves around company vehicles, so let’s look at what Inland Revenue expect from you if you provide vehicles for any of your staff:
- the company policy on motor vehicles
- any private use restriction letter in place, signed by the directors and the employee
- documentation that shows regular checks on the vehicle to ensure it’s not being used for private matters
- the employee’s job description and employment contract
- the employee’s performance review notes confirming they’re sticking to company policies.
For an SME owner, that list can be daunting, and a good reason to talk to us. As an independent set of eyes, we can help you determine what you need to do, what you don’t need to do, and how to go about doing it (including creating proper documentation). The value of expert advice is heightened by some of the finer points of FBT legislation. For example, did you know:
- if an employee takes a vehicle home one evening and returns to work with it the next morning, the laws say it’s been available for private use on two days
- Inland Revenue expects you to check that employees are adhering to restricted use policies at least once every quarter
- just because a vehicle has your company logo on it, that doesn’t automatically make it a work-related vehicle, so it doesn’t automatically become exempt from the usual requirements of FBT
- there is an option for some companies that have one or two vehicles to elect to use the motor vehicle expenditure rules rather than pay FBT in certain circumstances.
If you didn’t know all those things, you’re in great company! FBT is complex. Inland Revenue recognises this and will work with you to help you comply. The best approach is to get professional advice (that’s us) and, where appropriate, go to Inland Revenue for a written opinion on any matters that aren’t clear. That way, even if Inland Revenue disagrees with your FBT return, they’ll see that you’ve taken reasonable care to get things right and may not impose penalties.
Talk to us if you think you’re liable for FBT.