Monthly Archives: March 2016

Trivial benefits exemption

From April 2016, where trivial benefits are provided to employees they may be exempt from tax if certain conditions are met. The conditions are:

  • the cost of providing the benefit does not exceed £50
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the voucher as part of a contractual arrangement (including salary sacrifice)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
  • where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any exemptions or allowable deductions.

One of the main conditions is that the cost of the benefit is less than £50, if the cost is above £50 the full amount is taxable, not just the excess over £50. The cost is the cost of providing the benefit to each employee not the overall cost to the employer. Where the individual cost for each employee cannot be established, an average could be used.

Further details on how the exemption will work, including family member situations, are contained in the Government guidance. However if you are unsure please do get in touch before assuming the trivial benefit you are about to provide is covered by the exemption.

Internet link: GOV.UK

Advertisements

Benefits and expenses – bespoke scale rates

From 6 April 2016 there are a lot of changes to the way in which benefits and expenses are reported to HMRC.

HMRC have set out the maximum tax and NICs free allowances that can be paid by employers to employees for subsistence. Subject to qualifying conditions, the amounts are set out below:

Minimum journey time Maximum amount of meal allowance
5 hours £5
10 hours £10
15 hours £25

Where a meal allowance of £5 or £10 is paid and the qualifying journey in respect of which it is paid lasts beyond 8pm a supplementary rate of £10 can be paid.

Employers may choose to reimburse employees for the actual costs incurred. However where employers wish to use bespoke rates other than those set out above, they will need to apply for approval from HMRC for bespoke rates.

HMRC have issued an online application form to allow employers to request approval for these bespoke amounts. This should state the rate that the employer wishes to pay and also needs to demonstrate that the amount is a reasonable estimate of the amount of expenses actually incurred by the employees.

To establish these amounts, HMRC have confirmed that the employer should carry out a sampling exercise to verify the actual expenses incurred by employees. We would be happy to advise you on the sampling which would need to be carried out for your business.

In addition, employers will need to have a checking system in place which ensures that the payments or reimbursements are only make on occasions where the employee would be entitled to a deduction from their earnings and that the employees have actually incurred and paid the amounts.

Once approval has been given by HMRC, they will issue an approval notice which sets out the date from which the approval is given and what expenses are covered. It will also state the date when the approval notice ends which will be no later than five years from the start date.

Please do get in touch if you would like help with benefits and expense reporting or agreeing Bespoke rates.

Internet links: GOV.UK HMRC