Since April 2016 employers have been able to spoil their employees with small benefits that do not count as taxable perks. This is the trivial benefits exemption. In order to avoid the exemption being exploited HMRC have put a couple of conditions in place:
· If the benefit is given as a substitution for normal wages, the exemption cannot be applied
· The exemption is capped for directors of close companies (being those controlled by 5 or fewer individuals).
Spend cap for directors
For directors, the exemption is restricted to £300 per year and only applies to goods and services to the value of £50 per perk. Directors can therefore use this exemption up to six times a year.
A family tax-free benefit?
If your client’s spouse or partner happens to be a director as well, they qualify for their own benefit exemptions which can be used in tandem. For example, while a single exemption benefit may only cover a single theme park ticket, if the spouse is a director as well, the exemption could cover the cost of the second ticket. This gives the two a day out on the company without tax or NI implications.
The fine print
It is important to know the basics before you hurry to spend your company’s money! But make sure you don’t fall into common traps! The exemption does not apply to cash payments or anything equivalent.
Tip: Retail vouchers of £50 qualify for the exemption. This enables the employee to spend the voucher when it’s most convenient for them. Note: retail vouchers should be purchased at separate times to avoid HMRC claiming it’s a single benefit. Many retailers sell gift vouchers which can be spent on a wide range of goods so head to Amazon or Tesco or John Lewis before the end of the tax year to make use of this useful exemption!
For more information, speak to one of our team
This summary is published for the information of clients. It provides only an overview of the main points, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.
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