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How to avoid liability
for Fringe Benefit Tax (Not
Tax Evasion which is illegal)
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| The Inland Revenue
will generally accept that no liability exists if you undertake
sufficient action to remove your liability. |
| Some of the actions
you may take are; |
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| Company Cars |
- Implement a policy that the
car can not be taken home or used for private use
- Convert the vehicle to a service vehicle only and have a written policy of no personal use. (The vehicle may still be taken home if it is needed for call out purposes etc although this may incur a special rate of FBT in some situations)
- Where the vehicle has personal
use and thus FBT liability, run a record of days where it is
not available for personal use. Eg While the user is Out of the
Country and the vehicle is parked either at the office or Airport
etc but not if the vehicle remains at the users home and the
employees family may have the use
- Change to lease on a year by
year basis to reduce the liability for FBT on the full value
of the vehicle
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| Staff Purchases |
- Sell any discounted product
at no lower than your wholesale price unless you can prove that
the product is now worth a lesser price eg returned stock that
is not saleable and would normally be given away to a charity
or destroyed.
- Document clearly the values
involved and where write-offs of returned product are sold to
staff.
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| Telephones |
- Have a written policy of no
personal use of cellphones
- If you pay for a staff members
home phone separate out personal toll (long distance) calls and
reduce your liability by the business calls.
- If your staff member has two
home telephone lines, it is reasonable to consider one is there
for business purposes and could be paid for by the company.
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| Allowances |
- Pay only an allowance value that you can substantiate by previous expenditure. Eg car allowances should have a log book run for 3 months every 3 years which substantiates the mileage for which you pay. Anything above this value, will incur a Fringe Benefit Liability.
- Make allowances paid for relocation
of family and education taxable and part of the salary package.
(This is no longer a fringe benefit)
- If staff pay for part of their
medical insurance then this part is exempt from the Fringe Benefit
Tax you pay. You may also add this to the salary package paying
PAYE and then deduct the payment of the insurance from the wages
paid if the employee agrees to this option.
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