Business Doctor: Tax issues on a secondment
M writes: My company has offices around the UK. We have asked a staff member to move to another city for a 12-month project. We want to cover their regular journeys home, plus rental costs. Can we do this without triggering a large tax bill? Must we pay rent directly?
This is not uncommon as more businesses are requiring employees to operate from multiple locations, writes Jon Dawson, partner at Kingston Smith LLP. The key is determining if an employee has more than one permanent workplace, or if one workplace will qualify as temporary.
If one is temporary, you can cover accommodation and travel by reimbursing expenses. But you can reimburse only costs truly incurred; anything above that would be taxable as income. Copies of tickets, receipts and a rental agreement should suffice.
You do not need to draw up a contract directly with a landlord. The risk to your firm would be minimised if your employee entered into this arrangement. If they were to resign before the end of the tenancy, you could face extra costs.
Update the contract with your employee to reflect the new arrangement, including its temporary status and detailing that any expenses apply only for the duration of this project. If the move becomes permanent you will need to stop reimbursing costs or start processing them through payroll as part of a larger salary package.