The Trivial Benefits In Kind Exemption - More Significant Than The Name Suggests!

In almost every tax year, a positive tax reform is introduced that just does not seem to get traction.

In 2015-16, this was the Marriage Allowance about which we have written extensively. This year, it looks to be the Trivial Benefit in Kind exemption.

As the festive season approaches, it is timely to examine this in detail. To qualify as a Trivial Benefit, there are four conditions;

The benefit is not cash or a cash voucher;
The benefit cost is no more than £50.00 per benefit (or an average of £50.00 if the benefit is for a group of employees and it is impractical to calculate the individual cost);
There is no contractual entitlement to the benefit nor is it part of a salary sacrifice scheme;
The benefit is not a reward for nor in anticipation of work-related performance.

For a ‘Close Company’, the annual amount is capped at £300.00 for the Directors and their families. A Close Company is defined as being privately owned and controlled by five or fewer individual participators. As a result, this covers most small companies and many family businesses.

If the benefit qualifies, it will not be deemed taxable income so no Income Tax nor National Insurance would be due.

There are two important considerations:

A gift or store voucher is not defined as a cash voucher;
For employees, there is no annual limit whether or not the employer is a Close Company.

As a result, the Trivial Benefit in Kind exemption may be far from trivial, especially for lower paid staff.

The sort of expenses that would be considered a Trivial Benefit include:

Taking the team out to celebrate a birthday.
Giving each of the staff a Christmas present.
Buying a house warming gift.
Engagement, wedding and anniversary presents.
Sending a gift on the birth of a baby.
A staff summer barbeque.

There are a couple of points to be aware of:

Like the Annual Parties and Functions exemption, the Trivial Benefit in Kind exemption is not an allowance. If the cost of the particular benefit exceeds £50.00, the whole amount is taxable not just the amount over £50.00.
The exemption applies to the Income Tax and National Insurance on the benefit. The Corporation Tax treatment does not change so anything considered as Entertainment remains disallowed.

If you have any questions or would like any further information on the Trivial Benefit in Kind exemption, please email us at tax@cooperfaure.co.uk.

The Trivial Benefits In Kind Exemption – More Significant Than The Name Suggests!

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