The benefit of Air Miles

Have you considered rewarding yourself with tax-free Air Miles (or other credit card reward schemes)?  Particularly if all you have to do is help spend the company’s money! 

So how does this work?

With your regular expenditure, points or Air Miles slowly accumulate on your credit card statement.  But if you settle business expenses on the company’s behalf using on your own credit card the rewards can soon mount up.

The company reimburses your expenses, leaving you with, say, Air Miles to convert into free flights, etc.

But is this really tax-free?

You would have thought that this benefit in kind, obtained through your employment with the company, would have already been picked up by the Taxman. This is especially so as the Air Miles, when used, have a clear market value for possibly charging you income tax and the company employers NI. But he hasn’t – yet.

If an Inspector did call and does take an interest in such benefits, what could you say?

Consider mentioning a piece of case law called Pepper v Hart. The decision from this case applies to benefits not specifically covered by legislation, and states that the value of the benefit is calculated as the extra cost to the company of providing it, not its market value.

In the Air Miles example there is a benefit but there is no extra cost to the employer in obtaining them. Hence there is nothing to tax.

Warning! Check that the company has not had to pay a supplementary subscription fee for the employee to benefit from such a scheme. It is likely that such a subscription fee would be taxable.