The new regime for Trivial Benefts in Kind (BiK) came into effect on 6 April 2016 and recently became legislation in the Finance Act 2016.
Under the new trivial BiK regime, a BiK provided by an employer to an employee is exempt from tax as employment income if ALL the following conditions are satisfied:
- the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person)
- the benefit is not cash or a cash voucher i.e. exchangeable for cash
- the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements), and
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)
Note that store vouchers which can be exchanged for goods/services are allowed. This will be very welcome to employers as previously these had to be taxed via the payroll.
To avoid smaller Limited Companies taking advantage of this any trivial benefits provided to an individual who is a director or other office holder of a 'close' company (or a member of their family or household), the exemption is capped at a total cost of £300 in the tax year. Broadly speaking, your company will be 'Close' if it is owned and controlled by 5 or fewer individuals.
So to give you a few examples of what you could do:
- Give store vouchers to staff at Xmas
- Give flowers, chocolates or wine etc for staff birthdays or any other life event (It doesn’t have to be for a life event but must not be in recognition for any part of the employees duties. It could just be a random gift)
- Take staff out for meals for example to celebrate a birthday
- Directors are employees – so even if you as the Director are the sole employee you can provide trivial benefits up to the cap of £300 in the tax year
- Each trivial benefit must cost £50 or less, not a penny more
- Trivial benefits must not be in recognition for and part of an employee’s duties and provision of trivial benefits must not be a contractual entitlement
If any of these conditions is not satisfied then the benefit is taxed in the normal way, subject to any other exemptions or allowable deductions.
The exemption applies equally to benefits provided to the employee or to a member of the employee’s family or household.
The new rules will remove the need for trivial BiK to be included in PAYE Settlement Agreements or disclosed on P11d forms.