Tax on benefits in kind to be relaxed

18 December, 2015

HM Revenue & Customs (HMRC) has announced that 6 April 2016 employees’ benefits worth £50 or less, paid for by an employer, will be deemed trivial and exempt from tax and National Insurance

At present, there is no hard and fast rule when it comes to accounting for benefits in kind and it is often down to HMRC to decide at its own discretion which benefits in kind should be taxed and which are trivial.

Directors and certain senior employees of so-called ‘close companies’ will also benefit from the new rules and they, and members of their families or households, will be able to receive benefits in kind of up to £300 a year before tax is payable.

When the new rules apply, the Treasury estimates it will lose £5m of tax in 2016-17 and £10m annually after then.

However, the change will cut significant administrative costs for itself and employers. It said: “Employers are currently required to agree with HMRC whether certain benefits in kind can be treated as trivial. This is a burdensome process for both employers and HMRC, and is disproportionate to the amounts of tax and National Insurance contributions due.”

At Watson Buckle we have years of experience helping employers manage benefits in kind for their employees and have helped settle a number of disputers with HMRC. Whilst this new move will remove a significant burden for employers, it is still advisable that businesses speak to an accountant if they provide costly benefits in kind.

To find out how Watson Buckle can help your business with benefits in kind, please contact us.