Many business owners and employees join a gym to maintain or improve their physical fitness in order to help them with their work. Whilst this therefore seems like it may be a cost that the company can pick up on behalf of employees and directors it is not considered to be wholly and exclusively for work purposes and so where a company pays for a gym membership on behalf of an individual a taxable benefit arises which is reportable on a P11D.
The taxable benefit means that the gym membership is subject to income tax at the employees marginal rate (so basic rate taxpayers will pay 20% and higher rate taxpayers will pay 40% on their gym memberships), and the company will also have to pay Class 1A NIC at 13.8% on this amount each year that the membership is active.
For companies with larger employee bases it may be possible to obtain favourable corporate memberships deals with local gyms based on the number of individuals who are interested in joining the gym. In these circumstances the saving on membership fees may outweigh the tax cost of paying via the company.
Employees may choose to have the membership fees deducted from their wages after tax in order to avoid a taxable benefit arising but to allow them to access the corporate membership rates. In these circumstances, where the employee effectively pays for the membership by deduction from their wage no taxable benefit arises.
For companies with available space it is possible to provide an in-house gym for use by employees without any taxable benefit arising. There is no requirement to charge the employees for the use of the gym and such an offering may help to make the workplace more attractive for prospective candidates and existing employees, especially those who are perhaps reluctant to relinquish their working from home status post Covid.