Is your company remuneration package structured in the most tax efficient way ?

As we approach the time of year when forms P11D are prepared, in order to declare benefits in kind to the Inland Revenue (before 6 July 2004 deadline), this is an ideal opportunity to review and possibly amend the remuneration packages of directors and key employees. To ensure that the taxation is kept to a minimum we suggest that such a review should consider the following matters:

1. Whether it is better for cars to be owned and have their running costs paid by the company or by Directors or employees personally.
2. Whether company car tax could be reduced without unacceptably prejudicing choice by changing the vehicle to:
   • A lower CO2 emission car.
   • A classic car (aged over 15 years old and now worth less than £15,000).
   • A van (including some twin cab pick-ups).
   • A pool vehicle.
3. Whether it is cheaper for employees to reimburse the company for the full cost of privately used fuel, or suffer the tax charge on the fuel benefit in kind.
4. Whether the NIC savings for both the employer and employee make it attractive for the employer, either, making contributions directly into the employee’s pension scheme or providing the employee with childcare vouchers in exchange for a salary sacrifice.
5. For owner managers, reviewing the mix of salary and dividends. This exercise needs to be undertaken in light of the recent Budget changes relating to corporation tax and dividends, as well as the Inland Revenue’s current view on taxing dividends received which are disproportionate to either the capital investment made by the shareholder or the involvement of the shareholder in the business.