Small, but Worthwhile, Tax-Free Benefits in Kind

Business clients who have been with us for some time will know that the tax code provides for certain small benefits which are provided by an employer to employees (including director/shareholders), are exempt from Income Tax and National Insurance.

Below, we reproduce some of the information previously supplied on iNews (because this is something to consider for the remaining weeks of the tax year, ending on 5 April).

The following applies generally to employees who can receive unlimited instances of small benefits. But, director/shareholders might be more interested to hear that they can receive up to six individual benefits, each worth no more than £50, in the tax year, thereby amounting to up to £300 of tax-free income if organised correctly.

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:

• Providing a retail voucher;
  
• Buying a present;
  
• Taking an employee out for a meal. 

The 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 expenses you can claim in your company tax return.

If you would like any additional information regarding how benefits in kind are taxed, please do not hesitate to contact our Tax Experts.