At present, unless a benefit-in-kind is subject to a specific exemption or extra statutory concession, it is taxable and subject to Class 1A or Class 1 NICs.
Although HMRC can agree that certain trivial benefits can be ignored for tax purposes, this has to be on the application of the employer to obtain a so-called ‘trivial benefits agreement’. Where employers have not obtained such an agreement, HMRC may seek to recover tax and National Insurance contributions (NIC) on the benefit, plus penalties and interest. Items that typically are included in an agreement are gifts to employees to celebrate weddings or the birth of a baby, flowers to employees who are sick or low value Christmas gifts.
What could never be agreed by HMRC as trivial was the provision of gift vouchers at Christmas or for any other occasion. Gift vouchers have always been taxable via the P11D and subject to Class 1 NICs through the payroll or are rolled up into a PAYE Settlement Agreement.
However, many employers have not ever had a trivial benefit agreement, have not in the absence of such an agreement reported such items on a P11D nor agreed a PAYE Settlement Agreement.
So to regularise this position, to put the provision of trivial benefits on a statutory footing, and to clarify what can be treated as exempt, a new exemption of £50 including VAT for each trivial benefit-in-kind provided will be introduced from 6th April 2016. This new exemption will apply to both employees and former employees i.e. pensioners.
This change is introduced by draft Finance Bill 2016 clauses for tax, and draft secondary legislation for NIC which will amend the Social Security (Contributions) Regulations 2001 and in respect of former employees will amend the Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) Regulations 2007.
For the purposes of the new exemption, a trivial benefit is a benefit that is provided to an employee, or a member of the employee's family or household, that meets each of the following conditions:
- The benefit is not cash or a cash voucher
- The cost of providing each benefit does not exceed £50 (it is not an annual limit of £50)
- The benefit is not provided under a salary sacrifice arrangement or any contractual obligation
- The benefit is not provided in recognition of services performed, or to be performed, by the employee as part of their employment
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