I posted a copy of an Informanagement article to my Linked In group this week. If you are not already linked, you can do so here.
The article covered the rules that would covert an otherwise benefit-in-kind charge for attending the annual Christmas bash, into a tax-free perk.
What I did not mention in similar vein, is do not forget the so-called “trivial benefit rules”. If you want to provide your employees, or yourself with a Christmas treat, or advise clients to do the same, consider the following.
The trivial benefit rules apply if:
- 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); and
- the benefit is not provided in recognition of services performed by the employee as part of their employment duties (or in anticipation of such services).
Similar rules exist for director/shareholders with subtle differences. Where the employer is a small (close) company and the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year.
If any of these conditions are not satisfied then the benefit is taxed in the normal way, subject to any other exemptions or allowable deductions. The tax exemption applies equally to benefits provided to the employee or to a member of the employee’s family or household.
Practitioners are no doubt aware of these benefits, but are your clients and prospects?
When the outlook for 2019 is looking pretty dour, this is a good time to sow a little seasonal cheer, and what better way to do this than to turn the process into a tax-free perk.