Is gym membership a taxable benefit?

Supporting your employee’s health and wellbeing is increasingly seen as a vital part of any successful business. There are numerous benefits to having a fit and healthy workforce such as; reduced sickness absence, improved employee concentration and engagement levels, and generating a greater output during the working day.

Offering either free or subsidised gym membership for your staff can be a great way of encouraging a healthy lifestyle, but what are the tax implications of doing so? Can providing gym membership to your employees be viewed as a taxable benefit?

Changes to taxable benefits from April 2017

Prior to April 2017, gym membership, whether it was provided free to employees or was offered at a subsidised rate, and whether administered in addition to an employee’s cash remuneration or as part of a salary sacrifice arrangement, could be treated as a taxable benefit. This means it would not be taxed and would be exempt from employers National Insurance contributions.

However in the 2016 Autumn Statement, Chancellor Phillip Hammond announced that the number of employee perks that attracted tax and employer National Insurance advantages when provided through a salary sacrifice scheme would be limited, with gym membership being one of the benefits to be axed. Other perks to lose their tax exempt status included; private medical insurance, relocation expenses and travel passes.

The salary sacrifice scheme means that the cost of the gym membership, or other eligible perk, would be deducted directly from an employee’s salary through your payroll before tax and NI were deducted, and before the employer’s NI contributions were calculated. However, reducing the number of benefits to which this is eligible will allow the government to collect the tax and NI contributions from these numerous perks that previously would have been lost.

How is gym membership now taxed?

Obviously these changes do not mean that as an employer you are no longer able to provide free or subsidised gym membership for your employees; however, these now need to be treated differently for tax purposes.

You should now report the cost on a P11D form for each employee utilising the scheme, and pay Class 1A National Insurance contributions on the value of the membership.

What about onsite gyms?

If you provide a free to use onsite gym or other sporting facility this remains exempt from tax and National Insurance contributions, as long as:

• It is available for use by all of your employees, and is used mainly by employees, their families, former employees, and employees of any companies that you have worked together with to provide these facilities
• It is not available for use by the general public
• Is located either in the workplace or somewhere that isn’t a domestic home, holiday accommodation, or other overnight accommodation provider
• Doesn’t include the use of mechanically propelled vehicles such as boats, road vehicles and aircraft

The rules around taxable benefits can be quite complex and difficult to understand, especially if you are a small company looking to improve their employee offering for the first time. Handpicked Accountants can put you in touch with a number of local accountants who have specialist knowledge in this area. Each of our recommendations will be for accountants who have been thoroughly vetted, usually through years of our knowledgeable partners actually working with these firms.

Contact Handpicked Accountants to find your perfect accountant today.