Trivial Benefits, Benefits in Kind (BiK)
This is where 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).
Directors (of ‘close’ companies) are restricted to a total cost of £300 in the tax year, however, this does mean you can reward yourselves 6 x £50 gift cards as separate gifts, for non-work-related reasons!
Importantly, store cards that can be exchanged for goods/services are allowed and are no longer to be taxed via the payroll.
Here are a few other examples of treats you could offer:
- Give store vouchers to staff/directors at Christmas
- 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.
Please remember to:
- Keep detailed records to demonstrate that no benefit is due. You may need to make changes to existing procedures to show the new rules have been met
- Ensure the cost of the benefit is the VAT inclusive amount
- Ensure that each gift card/gift is £50 or less
Christmas fun – How will you be celebrating this year?
Are you planning on going all out this year for your Christmas festivities and having an in-person event, or will you be hosting a virtual event online again?
Whichever way you decide to celebrate, don’t forget, if you meet the following conditions, the cost of the festivities will be an exempt benefit and eligible for tax relief.
Under the current legislation, UK businesses can provide annual functions for their staff with no need to pay tax or national insurance contributions on the costs relating to a function. To be eligible for tax relief, the following conditions must be met:
- The total cost must not exceed £150 per head, each year.
- This amount is a limit not an allowance. Therefore, if the event cost £151 per head, then none of the cost is allowable.
- £150 includes VAT and any additional costs such as transport or accommodation.
- The event must be open to all employees.
- The event must be for entertaining employees and their partners.
If you would like any further information, please contact us.
Thompson Wright Limited