Crackdown on trivial benefits exemption
HMRC has provided various “interpretations” of the rules for trivial benefits in the last three employer bulletins, as it apparently views those rules as too generous.
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Typical HMRC thinking - ignore vast sums being lost through evasion and concentrate on the inevitable consequences of their own scheme.
Think I'll award myself £50, just because I'm worth it.
And as has to be pointed out far too often around here, HMRC's references to "legitimate expectation", much like all of their other guidance, does not carry the weight of the law, and is liable to be challenged at Tribunal.
I know of a company that was penalised for supplying bacon rolls to directors at board meetings, in order not to have to break for lunch. Half a dozen directors; six economical bacon rolls per annum. Tomato ketchup supplied by an individual director. HMRC didn't even want to discuss the issue of 'trivial benefits'.
They're trying to have their cake and eat it. The removal of small benefits from P11Ds (by those who bothered to report them anyway) saved HMRC just as much time as the employers. In fact, trivial benefits were exempt from P11D reporting anyway under the extra-statutory concession. HMRC even used to cite examples like Christmas turkeys. Try buying a turkey for £50 now. This limit is obviously going to be allowed to wither on the vine, just like the 15p per day luncheon vouchers.
You'd think they'd have better things to do than worry about coffee and cakes. Usually this sort of fuss is only kicked up by individual HMRC staff trying to act tough, but this latest nonsense seems to be policy.
I think this is just another example of HMRC making up their own version of the law. My advice for owner/directors is to carry on claiming little treats of up to £50 a month but to document them as gifts. Make sure you use a company card though. Personal expenses don't count unless the receipt is in the company name, which is unlikely for restaurant bills and theatre tickets.
Clothes are a good thing to use the benefit on. One of my clients organises corporate events and is told by the clients what clothes/shoes to wear, even how to do her hair. They don't count as uniform unfortunately so are non-tax deductible under the everyday wardrobe rule, but they can be claimed as trivial benefits (if under £50) and she can get the VAT back as well.
Contributors to Aweb often cry out for tax simplification. The treatment of trivial benefits was one move towards such but what happens? Advisors immediately start looking for ways in which they can take advantage (for their clients) by, for example, claiming £50 every month. Is it any wonder therefore that HMRC responds as it has? Will it surprise anyone if the measure is removed or becomes too burdensome to work? Simplification has to work both ways. If 1million people each get an extra £600 per year, tax free, the cost is anything but trivial. Remember the loan charge?