Trivial benefit exemption is an invaluable way for HM Revenue & Customs (HMRC) to simplifying matters but can also save significant amounts of tax for businesses if used wisely. It mops up the small benefits in kind paid to employees during a year and specifically exempts them from tax. Typically, these relate to gifts made to employees on occasions such as birthdays, weddings and Christmas.
There is no tax on benefits paid by employer if:
- It costs less than £50
- It isn’t cash or a cash voucher. Need to make sure vouchers have a nominal value of 0.01p. If they can be exchanged for full cash value the that cash value is taxable.
- That it isn’t a reward for work or performance
- It isn’t in their contract.
If you believe the exemption applies there is no need to contact HMRC. Typical examples can be taking a group of employees out for a meal to celebrate a birthday. Buying employees, a Christmas present, flowers on birth of a new baby, even a having a summer party for employees.
For group events where the individual cost cannot be established you can calculate the average cost per employee.
If the £50 amount is breached the whole sum is taxable, unless covered by Staff Entertaining Exemption of £150. So; an item for £50.99 is liable for tax and national insurance on the full £50.99, but an item costing £49.99 has no tax or national insurance liability.
Other payments can also be paid tax-free for employees, from the provision of workplace parking, canteen services, even relevant life policies which are a method of life assurance which does not give rise to a benefit in kind. Significant savings can also be made where company cars are provided to review alternative arrangements which can frequently be more tax efficient for employee and company.
If you are an employer or an employee who are interested in knowing how they might take better advantage of the tax exemptions available for remuneration please call 01473659777 or e-mail Mandy@beatons.co.uk to arrange a meeting.