Tax saving – trivial benefits

 

From April 2016, HMRC introduced a new tax saving on low-value or trivial Benefits in Kind which meet certain conditions. (See below for these conditions.)

Who will be affected by this new tax saving?

Employees who currently pay income tax and Class 1 NICs on certain low value or trivial benefits in kind provided by their employer and hence also…..

Any employer who provides their employees with certain low benefits in kind which will become exempt from income tax and NICs.

What are the Qualifying Conditions for this tax saving?

  • The cost of providing the benefit does not exceed £50
  • The benefit is not cash
  • The benefit is not a cash voucher (ie not a voucher that can be exchanged for cash)

Important contractual clarifications

  • The employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements) – so not matter how small the benefit is, if it arises contractually it will not qualify for the exemption
  • 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)

Restrictions and consequences for close companies

Qualifying ‘trivial’ benefits in kind provided to directors or other office holders of close companies, or to members of their families or households, will be subject to an annual cap of £300.

Close companies will need to keep suitable records to demonstrate that the £300 threshold has not been breached on a case by case basis.

Brief Background Information

Employers were formerly required to gain permission to treat any benefit in kind as trivial for tax purposes.  This was a very bureaucratic process and it is an example of some attempt to simplify tax generally.

It always feels good when I am able to share positive news with clients (and blog readers) – so today has been a good day!!  But please don’t spend it all at once…..

(photo caption – ? – ‘it’s the little things in life……’.)