Currently, there is no minimum cost threshold below which benefits are disregarded for tax purposes, but from 6 April employers who provides certain low value benefits-in-kind to their employees will, in some circumstances, become exempt from income tax. This will remove the need for annual reporting of such benefits via P11Ds or PAYE settlement agreements (PSAs).
A trivial benefit will be exempt from income tax, provided that:
- the benefit is not cash or cash vouchers per s75 ITEPA 2003
- the cost of providing the benefit, or its average cost per person does not exceed £50
- the benefit is not provided pursuant to a salary sacrifice scheme or any other contractual obligation
- the benefit is not provided in recognition of the employee’s service.
The following are examples of items that may be regarded as trivial benefits:
- a gift of flowers on birthdays, anniversaries or special events.
- workplace drinks eg. tea, coffee available to all employees.
- a Christmas turkey.
- a bottle of ‘ordinary’ wine.
- a box of chocolates.
Input VAT is reclaimable by the employer on the cost of trivial benefits made to staff.
An annual cap of £300 will be introduced for office holders of close companies and employees who are family members of those office holders. Those affected by this cap will be able to receive a maximum of £300 worth of trivial benefits in kind each year exempt from tax.
If you would like further clarification or advice on this subject, please do get in touch.