Benefits in Kind
Benefits in kind are ‘perks’ received by employees from their employers in addition to their salary. There are a number of changes coming into effect on 6 April 2016 which could affect how these benefits in kind are calculated and administered.
Abolition of the £8,500 threshold for low paid employees
Currently, where employees earn less than £8,500 p.a. including benefits, some benefits escape tax although this does not apply to office holders such as directors.
With effect from 6 April 2016, this rule is abolished so that employment benefits will be taxed on almost all individuals in the same way. There are exemptions for ministers of religion and for carers provided with accommodation from their employer, provided certain criteria are met.
Exemption for reimbursed expenses and related benefits
Up to 5 April 2016, where an employee pays a business expense on behalf of an employer which is subsequently reimbursed, that transaction would require an entry on a P11D unless the employer had been granted a dispensation by HM Revenue & Customs. The employee must then make a separate claim that it is not taxable since it is a business expense.
From 6 April 2016 dispensations will effectively become automatic so there will be no requirement to report business expenses provided certain conditions are met. Broadly the conditions are that the employer operates a system for checking that the employee has incurred the expense and, as a business expense, the employee could have claimed a deduction for it.
Currently, by concession, HMRC will disregard certain trivial benefits, such as flowers for an employee on the birth of their child.
With effect from 6 April 2016, this concession will move to a statutory basis through Finance Bill 2016. As the Bill stands, there are a number of conditions:
- the benefit must not consist of cash or a cash voucher;
- the cost of providing the trivial benefit must not exceed £50;
- the trivial benefit cannot be provided by way of a contractual obligation or salary sacrifice arrangement;
- the trivial benefit must be given for a non-work reason e.g. birthday or social event;
- for close companies there is a £300 annual cap for directors and other office holders and family members but when those family members are also employees, they get their own £300 annual cap.
Subject to legislation, qualifying trivial benefits will not need to be reported to HM Revenue & Customs.
These rules apply for the forthcoming tax year 2016/17. P11D’s for the current tax year 2015/16 will be due for filing before 6 July 2016. If you require assistance in completing them or you have a query over benefits in kind or remuneration in general, please contact our Tax Director, Jenny Marks.
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