Author: JP / / Latest News
From 6 April 2016 new rules were introduced to allow employers to provide their directors and employees with certain ‘trivial’ benefits in kind, tax free.
The new rules are a simplification measure so that certain benefits In kind will not need to be reported to HMRC, as well as being tax free for the employee. There are of course number of conditions that need to be satisfied to qualify for the exemption.
Conditions for the exemption to apply include:
- The cost of providing the benefit does not exceed £50.
- The benefit is not cash or a cash voucher
- The employee is not entitles to the benefit as part of any contractual obligation such as a salary sacrifice scheme
- The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)
So this exemption will generally apply to small gifts to staff at Christmas or on their birthday.
Prior to this change in the rules, the benefit in kind would have had to be reported on the employee’s P11D form at the end of the year, or alternatively the employers would have dealt with the tax and national insurance under a PAYE settlement agreement. Under such an arrangement at £50 Christmas turkey to a higher rate taxpayer could end up costing the employer nearly £95!.
Please note that where the employer is a ‘close’ company and the benefit is provided to an individual who is a director or other office holder of the company, the exemption is capped at a total cost £300 in the tax year.
For more information please contact the tax department on 01623 420269.