Making sure you are paying the right amount of tax can be a headache for everyone, with many employees unaware of potential tax saving opportunities. One solution is to offer a professional tax return service as part of the employee benefits package, says Andrew Higgins.

For many, the arrival of the dreaded Inland Revenue envelope signals evenings or weekends pouring over tax forms trying to make sure we pay the right amount of tax. And judging by the number of penalties issued for late submission, some of us put it off just a bit too long.

Despite the Revenue’s attempts to simplify the form, less than half of employees in the UK pay the right amount of tax. That’s a pretty staggering statistic, which shows that many employees are unaware of all the tax saving opportunities that exist.

One option for forward-looking businesses is to offer employees a professional tax return completion service. This can be built into a flexible benefits package, or simply be a service made available to employees at a fixed fee negotiated by HR or finance.

Jason McLaughlin, of Chartered Accountants McLintocks, provides such a service for companies. In his view, the reason why people end up paying the wrong tax is a lack of awareness of the ever changing tax system, combined with a lack of willingness to ask for additional allowances. “In my experience employees are ill at ease with tax forms and often just don’t know what they can claim for.”

Simple formula

The service offered by McLaughlin is based on a simple formula – whether it is part of a flexible benefits package, or simply a negotiated service, the employee will come along to a tax clinic where they will get a free one-on-one review with a senior tax advisor.

Based on that session, the advisor will inform the employee whether it is possible to make any tax savings. “In most cases we do identify some opportunities for tax savings,” comments McLaughlin. “We also often highlight overpayments and the Inland Revenue rules allow us to go back and reclaim overpayments over the preceding six years.”

Assuming savings can be made, the employee provides their tax and income details to McLintocks, who then complete and submit the tax return and liaise with the Revenue on the employee’s behalf.

“Our approach is to only take on a client if we can deliver savings that exceed the relatively low costs we can offer to complete a tax return,” says McLaughlin.

For employees, the advantages that flexible benefit packages and pension schemes offer can create tax complexities. In the tax world, ’employee benefit’ is an expression that covers a multitude of issues. Aside from the more traditional company car, medical insurance or shares, there are a range of other benefits that need to be considered.

Reimbursement of business expenses, professional memberships, mileage allowances, overnight allowances and childcare vouchers are just a few of the other items that interest the Inland Revenue. Each of these elements of the employee remuneration package has its own tax issues and there are both compliance obligations and tax planning opportunities to consider.

McLaughlin adds: “We see a lot of people who have spread their personal investments outside of work. It may be a buy-to-let property, a tax efficient ISA or a transfer of assets to a spouse in a lower tax band. This means we are not only dealing with the company remuneration, but also helping with them with all aspects of their personal tax. We also advise on tax planning around potential future investments.”

With personal finance and tax becoming increasingly complex, the value to employees of providing support in completing tax returns often outweighs the costs. While companies can let employees find their own accountancy practices, the pre-negotiated rates a business can achieve often means the employee will get an inexpensive service and see their employer as providing a more comprehensive package for them.

For more information, please visit: www.mclintock.net