Trivial Benefits Too Trivial

Exemption for small benefits-in-kind delayed

The recent Budget was supposed to hail the introduction of a statutory exemption for benefits-in-kind that are trivial in nature, e.g. small gifts such as a bouquet of flowers given to an employee to celebrate a personal event or a box of chocolates at Christmas. This came off the back of an Office of Tax Simplification suggestion, an announcement at Budget 2014 and a subsequent HMRC consultation document.

Benefits costing less than £50 would be considered trivial and employers would no longer have to report such benefits nor pay Class 1A NIC on these items.

The tax exemption would apply provided that:

• the benefit is not cash or cash vouchers as defined by section 75 of Income Tax (Earnings and Pensions) Act 2003
• the cost of providing the benefit, or its average cost per person does not exceed £50
• the benefit is not provided pursuant to a salary sacrifice scheme or any other contractual obligation
• the benefit is not provided in recognition of the employee’s service

The statutory trivial benefits exemption would also be subject to annual cap of £300 for office holders of close companies and their families.

Parliament has however decided not to legislate for the exemption and it will not therefore come into force on 6th April 2015 as was originally intended. A Treasury statement declared:

“The Government has subsequently decided to defer a number of measures previously announced for Finance Bill 2015 to a future Finance Bill, in recognition of the accelerated Parliamentary process that the bill will be subject to.”

“In addition, a number of clauses which had been intended for Finance Bill 2015 have been deferred as a result of discussions with the Opposition in the context of the end-of-Parliament wash up process.”

“The Government intends that measures deferred to a future bill will be legislated at the earliest opportunity in the new Parliament.”

Employers who, therefore, incur such expenditure in the course of providing their employees with minor benefits will, for the time being have to continue to ask HMRC to treat such benefits as exempt from tax on the grounds that the cash equivalent of the benefit taxable on the employee is so trivial as to be not worth pursuing.