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Due to the general election, the new tax and NI exemption for low value employee ‘benefits in kind’ had to be postponed, but it’s good to hear that it’s being introduced from 5 April 2016.

the current exemption

Employers have to declare job-related perks annually, even if their value is trivial.  For some time though HMRC have allowed employers to exclude these trivial perks, saving them the bother of assessing small amounts that would bring in little or no tax.

There are problems with the concession as it currently stands though.  Different tax inspectors have differing ideas of what’s trivial, so some employers/employees pay the tax and national insurance, whereas others may not. In order to clarify the situation the government is putting legislation in place which includes a clear limit on the level of perks that can be ignored.

exempt trivial perks

From 5 April 2016 onwards the new exemption will mean that employers don’t have to declare any perks they provide costing under £50 per employee.  There are some conditions, but generally the exemption can apply to as many perks the employer wishes to give.  If a benefit is already exempt, that exemption will take precedence over the new rule, for example a firm’s Christmas party.

the conditions for exemption

The perk must not be (other than the £50 limit):

  • part of a salary sacrifice arrangement whereby the employee gives up part of their salary
  • cash, or a voucher convertible into cash (a gift voucher would be ok)
  • a reward for an employee doing their normal job.

limited exemption for directors

In addition to the above conditions, directors and their families can only claim the exemption for benefits costing the company under £300 per year.  It is anticipated that the anti-avoidance rule will not apply to perks provided to family members who are entitled to them because they work in the business, although details of this legislation are yet to be published.

Until the new legislation comes into effect in 2016/17, we think it is reasonable to expect HMRC to accept trivial perks costing under £50 will not be liable to tax and NI providing they meet the conditions of the new regulations.

If there’s anything you’d like to discuss please don’t hesitate to get in touch with us on 01782 279615.