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BIK on dinner Jacket

Correct

Hi there,

a client has paid for a dinner jacket for his employees which they have now kept. It does not fall under trivial staff benefits, no corp tax relief is available on it due to "every day wardrobe".

So my question, even though no corp tax is given, the employees are they still subject to tax on the benefit? If so is it possible to run the amount through as an additional salary item that is then deducted from the net pay? This will save the job of P11D at the end of the year.

One added complication is they have bought a dinner jacket for a sub-contractor - what would be the best way to deal with this?

Many thanks

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12th Feb 2019 10:31

PALacc wrote:

no corp tax relief is available on it due to "every day wardrobe".

Eh?

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By Mr_awol
12th Feb 2019 11:49

Surely better for the employee to have a BIK for one year and then buy it from the employer at whatever the market value for a second hand DJ is (presumably very little)

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to Mr_awol
12th Feb 2019 12:05

Doesn't matter.

Let's say the purchase price is £200, and it's 2nd hand value thereafter is £10.

Then:

Buy year 1 and transfer year 1. The employee gets taxed on £10 under s 62 (unless he/she pays at least £10 for it) and gets taxed on a benefit of £190 under s 203/s204. Total amount taxable £200 (less anything paid).

Buy year 1 and transfer year 2. The employee gets taxed in year 1 on a benefit in year 1 of £40 (£200 x 20%) under s 203/s 205. And then gets taxed on £10 under s 62 in year 2, as well as havng a benefit under s 203/s 204 of £150 (£200 - £40 - £10). Total amount taxable £200 (less anything paid).

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