An exemption for trivial benefits in kind below £50 was expected to be introduced in the Finance Bill 2015, but has now been dropped for the foreseeable future. Tax experts are warning employers and contractors to take care when reporting trivial benefits in kind.
The Finance Bill 2015 was published towards the end of March, and the new rules were expected to be included. However, ministers have decided to postpone changes until a Finance Bill in the
future.
The proposed measures would have meant that benefits in kind, which cost the employer less than £50 to provide, would be exempt from current reporting rules from 6th April 2015. Now that the exemption has not been introduced, it is important for employers to continue reporting as usual, although the current guidance provided by HMRC is deemed to be “imprecise” by tax experts.
Some employers may have informal arrangements in place with HMRC, although these should now be renegotiated or confirmed as still being in place. If guidance isn’t adhered to, it is possible that a gift from an employer could turn into a tax bill, as income tax and National Insurance are charged on the value of the gift.
According to the employment tax director of KPMG, Steve Webb, it is possible that the delay in introducing the exemption could be due to a cap of £300 being placed on gifts to members of the family in close companies, to reduce tax avoidance, although the Treasury states that this is not the case.
What are benefits in kind?
A benefit in kind is a gift from an employer to a director or employee, often referred to as a “perk” or “fringe benefit”. Some of the benefits are taxable, while others are given without a tax charge. Generally, a person who earns less than the personal allowance won’t be taxed on benefits in kind, although this may not always be the case. There are special rules for some benefits, like those concerning company cars.
What is a ‘trivial’ benefit in kind?
A trivial benefit in kind will have a value of less than £50 and won’t be cash or a cash voucher. The benefit won’t be a reward or recognition bonus for job performance, and it won’t be included in your employment contract. The benefit in kind won’t be a salary sacrifice. If the above criteria applies, the benefit will be considered to be trivial.