Many people can go for years paying too much (or, perhaps more worryingly, too little) tax. PAYE aims to collect, over the course of a tax year, approximately the right amount of tax from your earnings.
Cheap or interest-free loans
Where loans from an employer total more than D5,000 for example at any time in the year, tax is chargeable on the difference between any interest actually paid and interest calculated at the ‘official’ rate (currently 12%).
Your remuneration package
An attractive remuneration package can include any of the following:
- Reimbursement of expenses
- More generous expenses – business travel in first or business class, or a better quality hotel on business trips
- Bonus or profit related award schemes
- Share incentive arrangements
- Pension provision
- Life assurance and/or healthcare
- Choice of a company car or additional salary and reimbursement of car expenses for business travel in your own car
- Mobile phone
- Contributions to the additional costs of working at home
- Other benefits in kind including, for example, annual parties costing not more than D150 per head for the year, or long service awards
Of course, negotiating the appropriate package is a matter for you and your employer, but you should seek our advice to ensure that your overall package is as tax and NI efficient as possible.
Your employer is required to report expenses payments to GRA each year. To avoid paying tax on these payments you have to claim a deduction on your Tax Return – your employer will provide you with a copy of your P11D.
This cumbersome process of reporting and then claiming expenses paid may be avoided if your employer has been granted a dispensation. Expense payments covered by the dispensation do not have to be reported to GRA and they do not have to be included, with a counter-claim, on your own Tax Return. Payments covered by dispensations will be subject to review from time to time, including in the course of a GRA inspection visit.
You may be able to claim tax relief for other expenses you incur in connection with your job, but the rules are very restrictive, and you may not always be able to claim for expenses you regard as reasonable work related expenditure.
Employer contributions to your pension scheme or your own personal pension policies are not liable for tax or NICs. The employee’s contribution attracts tax relief but not relief from Social Security.
You should be aware that while your employer can contribute to your personal pension scheme, these contributions are added to your own for the purpose of measuring your year’s pension input against the annual allowance. Extra relief may be available dependent on your level of contributions during the last three tax years. Please ask us or your normal pension adviser for advice.
Performance related pay
Although there are no tax breaks, performance related pay and bonus schemes are incentives to many to work harder and enjoy some of the benefits of the employer’s increase in profits. There can, on the other hand, be a national insurance saving for employees (not directors) if performance related pay is not included in the weekly or monthly pay, but instead paid as a one off bonus.
Travel and subsistence
The rules which allow tax relief for travelling and subsistence expenses are quite complex, and subtle differences in your working arrangements can change the amounts which you are able to claim, or can be paid tax free.
You will not normally be able to claim for the cost of travelling to your normal place of work, but if you have more than one place of work, sometimes travelling expenses are tax deductible when travelling to a temporary place of work for up to 24 months.
Site-based employees are able to claim a deduction for travel to and from the site at which they are working, plus subsistence costs when they stay at or near the site subject to meeting certain conditions.
Because the tax impact on your travelling expenses can be quite significant, you should ask for help if you are considering a change involving a long travel to work.
If an employee works from home, he or she may be paid an expense allowance by the employer without having to produce evidence of expenses.
If travelling on work, personal incidental expenses may be paid tax-free up to a limited amount a day in The Gambia or a different amount a day overseas.
This is designed to cover personal expenses incurred while away from home such as newspapers and laundry that may not otherwise be allowable. Employees must not charge the expenses on their hotel bills in addition to the fixed rate allowance.