Trivial Benefits in Kind

Trivial Benefits in Kind

Under new rules in Section 323A ITEPA 2003, certain benefits in kind may have just become more beneficial. On the run up to Christmas it can often be the case that employers take this opportunity to bestow gifts on their staff, and with this in mind we take a look at changes made to how these benefits in kind are taxed.

Under previous rules when staff are provided with a benefit from an employer, an employee would suffer an extra income tax charge, however as of 6th April 2016 employees can now be exempt from income tax on ‘trivial’ benefits provided by employers. Under this exemption the benefit 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.
  • The employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements). 
  • 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).

Types of trivial benefits that are allowed include expenses such as:

  1. Taking a group of employees out for a meal to celebrate a birthday.
  2. Buying each employee a Christmas present.
  3. Flowers on the birth of a new baby.
  4. A summer garden party for employees.

Some examples of what is not allowed under the exemption include:

  1. Providing a working lunch for employees (because this is related to their employment).
  2. Gifts, incentives or events related to performance targets or results.
  3. Gifts, incentives or events in relation to employment services e.g. team-building events.
  4. Taxis when employees work late.

The new tax exemption only applies to the tax that the employee would suffer due to benefits in kind. This is not to be confused with the tax you can claim in your company tax return. For example a birthday meal may well still count as entertaining, which is not allowed for corporation tax.

If you would like any additional information regarding the changes to how benefits in kind are taxed, please do not hesitate to contact our Tax Partners, Steve Crompton or Chris Barrington, on the details below:

Steve Crompton
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394

Chris Barrington
Tax Partner
direct dial: 01942 292505
mobile: 07730 436070