Tax-Free Perks! Did You Know There Were Such Things?
Are you overlooking your trivial benefits?
POSTED BY HELEN BEAUMONT ON 13/03/2019 @ 8:00AM
Did you know that there are such things as tax-free perks? These are called 'trivial benefits' and are usually overlooked ...
As long as these trivial benefits stay within a certain limit, and are not cash, then they could be classed as tax-free perks!
copyright: melpomen / 123rf
New legislation was introduced from tax year 2016/17 which detailed tax-exempt benefits (or tax-free perks) paid to employees. This included low-value Benefits in Kind which meet qualifying conditions.
These trivial benefits have to satisfy the following in order to qualify for exemption:
There is a £50 limit per individual (or a £50 average for a group of individuals)
The benefit cannot be cash or a cash-voucher
The employee cannot be contractually entitled to the benefit (including via a salary sacrifice arrangement)
The benefit is not provided in recognition of services performed by the employee
Here are some good examples:
Taking employees out for a meal or to celebrate a birthday
Buying employees a Christmas present
Flowers for the birth of a new child
A summer garden party!
Non-cash vouchers are allowed such as a store voucher
Remember, the expense has to be freely given and relate to employee welfare and goodwill, not employment service or based on performance. If the benefit exceeds £50 (or an average of £50 per head), the whole amount becomes taxable as a benefit in kind, not just the excess above and beyond £50.
However, some expenses will not be allowed, and HMRC give the following examples:
Providing a working lunch for employees (because this is related to their employment)
Gifts, incentives or events related to performance targets or results
Gifts, incentives or events in relation to employment services, e.g. team-building events
Taxis when employees work late
To avoid smaller companies taking advantage of this, any benefits provided to directors or other office holders have the exemption capped at a total cost of £300 per tax year (6 separate £50s).
Owned managed companies with no employees and just two directors (maybe husband and wife) can make use of the benefit by making gifts to themselves six times per year.
"There is a clue in the title that this is supposed to be a small benefit!"
If you'd like to find out more about tax-free perks and how they can work for your employees then do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.
Until next time ...
If you're looking to work with an expert tax advisor with a wide range of tax experience, do visit www.essendontax.co.uk to find out more about me and discover how I can help!
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen’s specialist knowledge in tax planning and experience ensures every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.