Submitted by Sestini & Co
| on Tue, 07/19/2016 - 7:30 | In Accounting and systems
It’s still currently awaiting Royal Assent (the final agreement) but it’s likely that a new ‘trivial benefits exemption’ will be introduced this year, backdated to 5 April 2016.
In a nutshell
Low value benefits will be exempt from tax as employment income and exempt from Class 1 National Insurance contribution.
What qualifies as a trivial benefit?
The new legislation is intended for low value benefits and to streamline administration.
What will this apply to?
- Modest entertainment provided by employers, such as drinks and meals for employees
- There will be a cap of £50 per trivial benefit
Trivial benefits must meet these conditions:
- The cost of providing the benefit does not exceed £50 (this can be averaged out by employee if provided to a group)
- The benefit is not a cash or a cash voucher
- The employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements)
- The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties – or in anticipation of employment.
Other points to note
- The new rules also apply where the trivial benefit is provided by a third party on behalf of the employer, as long as the employer ultimately bears the cost.
- The draft legislation seeks to extend the exemption on trivial BiKs to former employees
- Give effect to a matching disregard from earnings the BiKs that attract a Class 1 National Insurance Contributions liability (if they meet the trivial benefits criteria).
- There is no annual cap for employees
- There is an annual cap of £300 for directors, company secretaries and their family members who are employees
- If the cost of the benefit is over £50 the full amount is taxable, not just the element over £50
- Calculating the ‘cost’ of the perk can be complicated – ask us for advice!
If you’d like to check the impact of the changes, call us on 01761 241 861 or email us. We will be pleased to advise you or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.