When is a benefit in kind trivial?

Mar14

Posted in News

Gift voucher technology template.

From 6 April, “trivial” benefits in kind will no longer be taxable. So just what counts as trivial?

Across the country, payroll teams are gearing up for the new financial year. One of the most resource intensive parts of their work is likely to be a change to the way benefits in kind are treated. That’s because Section 323A of the Income Tax (Earnings and Pensions) Act (ITEPA) 2003 will take effect from 6 April, introducing a long awaited statutory exemption for trivial benefits in kind.

Under the exemption, benefits in kind will be exempt from tax as employment income if all the following conditions are satisfied:

  • The cost of providing the benefit does not exceed £50

Where a benefit is given to a group (for example, everyone is invited to a meal) and it is impractical to calculate individual benefit, an average will suffice. Provided the average cost of the meal per head is £50 or less (and the other criteria are met) it will be exempt.

  • The benefit is not cash or a cash voucher

Generally, vouchers are not exempt, irrespective of the amount, but there is an exception. Where, for example, you offer a Christmas gift of a bottle of wine to employees, but offer a voucher as an alternative to those who don’t drink, it will be exempt.

  • The employee has no contractual entitlement to the benefit

If the benefit is included in a contract or other agreement then it will be taxable, whatever its size.

  • 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)

So if, for example, the benefit is offered as an incentive for hitting a sales target, it will be taxable.

Where the employer is a close company and the benefit is provided to an individual who is a director or other office holder of the company (or member of their family or household) the exemption will be capped at a total cost of £300 per year.

You can find full details of HMRC’s guidance for payroll professionals and employers here. And if you need help in implementing any of the new financial year changes to your payroll just call us.