Under the new trivial Benefits in Kind (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).
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 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.
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.
Christmas fun – a virtual experience
Are you planning Christmas festivities for your staff and wondering if you can claim tax relief on these costs?
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 have to 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.
Under Covid restrictions, you may be thinking that Christmas celebrations are off the cards as how would you adhere to all of the rules and restrictions.
All is not lost! You can still provide festivities to boost your staff morale with some careful planning so that you are still meeting the exemption for employers.
Hold a Virtual Christmas Celebration. As an employer, you would be able to send out a hamper to each employee containing food, wine, soft drinks etc delivered to their home.
On the day of the party they can access the party via a zoom link and enjoy spending the evening together celebrating with maybe a quiz, or live music etc.
Either way, HMRC have confirmed that as long as the above conditions are still met, a virtual party will still be eligible for the exemption.
If you would like any further information, please contact us.