Tag Archives: Trivial Benefits

Trivial benefits in kind exemption may not be so trivial

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It’s Christmas and the annual minefield of gifts and Christmas parties for employers to navigate. If you are giving your employees gifts to create goodwill, the last thing you want to do is destroy that goodwill with an unexpected tax bill.

However, help is at hand from the new trivial benefits rules.

Previously, the rules were subjective. HMRC allowed exemptions for reasonable gifts but there were no clear thresholds, making it difficult to have certainty about tax treatment.

Under the new rules, benefits and gifts can be tax-free providing that:

-       They cost no more than £50 per benefit and
-       They are not cash or a cash voucher (gift vouchers e.g. for a shop, are allowed).

There is no limit on the number of trivial benefits that can fall into the new rules for employees, providing that they do not form part of the employee’s remuneration for their job or part of a salary sacrifice arrangement.

Special rules apply for directors to limit the overall total for a tax year to £300 of tax-free trivial benefits.

The new rules are good news for generous employers who can now have clarity about what is and is not tax-free, not just at Christmas, but throughout the year. Also, employers who were previously providing vouchers and paying the tax under a PAYE settlement agreement may no longer need to that.

And don’t forget the £150 per person tax exemption for events such as Christmas parties. But do be aware that the limit can only apply to one event, not spread across multiple ones and it includes the extras such as employer funded travel.

The VAT inclusive cost needs to be used when considering if the tax-free limit is reached for both trivial benefits and the annual events exemption.

For more information in trivial benefits, please contact our tax team by emailing tax@pmm.co.uk or by calling 01254 679131.

Trivial Benefits – The Facts

shutterstock_180753311The recent Spring Budget announced plans to introduce a statutory exemption for benefits-in-kind that are less than £50 and therefore classed as trivial. This was welcomed because it brings certainty to what was formerly a subjectively applied approach by HMRC to ignore trivial benefits.

However, the new exemption was not included in the Finance Bill issued after the Budget, so its future is currently uncertain.  There is due to be a widespread overhaul of the expenses and benefits rules in 2016, so it is possible that it falls within that.

If the new rules do come into effect, the more problematic aspect for business owners is that they include an annual cap on the exemption of £300 for business owners and their relatives.  That could mean tax complications for business owners. It doesn’t take many sandwiches bought by the business for working lunches (and other minor items) to exceed a total spend of £300 over the course of a year.  Hopefully this part of the new rules will be discarded or modified before they are introduced.

The other aspect to be aware of is that cash or vouchers can never be included as a trivial benefit and are always taxable, regardless of the amount.

The PM+M tax and payroll teams carry out expenses and benefits reviews for clients as part of our PAYE health check service.  If you are interested in finding out more about this or would like advice on expenses and benefits, please email tax@pmm.co.uk or call 01254 679131.