Treatment of tax on trivial benefits in kind (BIK) varies according to several factors. Check which conditions need reporting to HMRC and when employers need to pay tax and National Insurance on small benefits.
WHAT IS A TRIVIAL BENEFIT? April 2016 saw the introduction of new tax rules for trivial benefits in the United Kingdom.
Since then, employers do not need to pay tax on most small gifts or 'trivial benefits' that meet certain conditions.
HMRC grant an exemption for trivial benefits if all these factors apply:
These four factors would meet the conditions of trivial benefits definition. As such, there is no need for employers to pay tax or National Insurance on them or report them to HM Revenue and Customs (HMRC).
But, employers do need to pay tax on any benefits provided to employees if they do not meet all these conditions (see below). Contact HMRC general enquiries for employers if you are unsure whether a gift or benefit counts as a trivial benefit.
Giving trivial benefits to employees as part of a salary sacrifice arrangement will not be exempt. In this case, you would need to use form P11D to report it to HMRC. You should be reporting whichever amount is higher between:
Note: The rules on salary sacrifice agreements changed on the 6th of April 2017. HMRC guidance explains how to set up salary sacrifice arrangements and calculate tax and National Insurance contributions on them.
What if the employer is a close company and the benefit goes to a director (or individual with office holder status) of the company (or a member of their family or household)?
In this case, HM Revenue and Customs (HMRC) will cap the trivial benefit exemption to a total cost of £300 during any given tax year.
What is a close company? As a rule, it is a limited company with no more than five (5) 'participators'. It can also be a limited company where all the 'participators' are also directors. In most cases, 'participators' refers to the shareholders of small limited companies.
Expenses and Benefits for Employers | Dealing with employment related expense payments and 'BiK'.
Employees Benefit Expenses | A guide explaining HMRC tax treatment on fringe benefits or 'perquisites'.
Tax on Trivial Benefits HMRC Conditions for United Kingdom