A statutory measure will define which employer-provided benefits in kind (BiKs) are deemed ‘trivial’ and therefore exempt from income tax and National Insurance contributions (NICs).
Following the next Finance Act, from April 2016 an exemption will exist for low-value BiKs which meet certain qualifying conditions, including a £50 limit per individual BiK.
At present, there is no hard and fast rule and HMRC can decide at its own discretion which benefits in kind should be taxed and which are trivial.
Also under the new rules, qualifying trivial BiKs provided to directors or other office holders of close companies, or to members of their families or households, will be subject to an annual cap of £300.
When the new rules apply, the Treasury estimates it will lose £5m of tax in 2016-17 and £10m annually after then. However, the government pointed out the change will cut administrative costs for itself and employers, saying: “Employers are currently required to agree with HMRC whether certain benefits in kind can be treated as trivial. This is a burdensome process for both employers and HMRC, and is disproportionate to the amounts of tax and National Insurance contributions due.”
Read more information on the new rules in the Policy paper ‘Income Tax: statutory exemption for trivial benefits in kind’ here.