Trivial benefits in kind exemption may not be so trivial

The issue

‘It’s Christmaaaaas!’ as Noddy Holder would say. With Christmas comes an opportunity for generous employers to bestow gifts on their staff. Unfortunately such treats have not historically been without tax hassles. Employees would either be hit with a tax charge which would undermine the gift somewhat or employers would have to go through the hassle of settling with HMRC which would then hit them with excess tax (subject to the previous rather ambiguous rules about which gifts could be provided tax-free, for example a ‘seasonal’ turkey or ‘ordinary’ bottle of wine). There are now some great new rules which were introduced by Finance Bill 2016 which means that tax is not payable on trivial benefits:

 

The criteria that need to be satisfied for a trivial benefit are as follows:

  1. No more than £50 per benefit (or average of £50 if the benefit is provided to a group of employees and it is not possible to work out the exact cost for each individual).
  2. Not cash or a cash voucher (but gift vouchers e.g. for a shop, are allowed).
  3. This cannot be a contractual benefit (or part of a salary sacrifice scheme).
  4. It should not be in recognition of an employment duty (although this will be very subjective).
  5. Even directors of close companies can enjoy up to £300 of benefits in this way and there is no limit for other employees.

 

What does this mean?

Unfortunately for employees this does not mean that employers will be splashing out on regular £50 gifts. Clearly these gifts will still be a marginal cost (albeit less expensive) to the business. However this is good news for those businesses who are already very generous to their staff. In time perhaps we will see an increased gift culture developing as this is after all a factor in staff retention. Will we see directors of close companies helping themselves to 6 lots of £50 John Lewis vouchers? – and will HMRC accept that this is not in recognition of employment? Time will tell.

 

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