£50 tax exemption for low-value benefits in kind set for April 2016

The Government is forging ahead with its plan to implement a statutory tax exemption from income tax and NICs low-value benefits in kind (BIK), set at a £50 limit.

Furthermore, qualifying ‘trivial’ BIKs given 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, with these measures coming into force after 6th April 2016 as part of legislation in the Finance Bill 2016.

Employers will no longer be needed to report trivial benefits on either form P11D or via Pay As You Earn Settlement Agreements (PSAs) at the year end.

In addition, they will display similar disregard for trivial BIKs that attract Class 1 national insurance contributions (NICs). Draft secondary legislation for the NICs changes was published for consultation yesterday.

The new legislation will enable amendments to be made by Statutory Instrument to the £50 upper limit per individual benefit, the £300 annual monetary cap for directors and other office holders of close companies and members of their families and households who are also employees of the company, and the conditions of the exemption.

Meg Wilson, tax writer, CCH, said: “There is no doubt that if HMRC spot what they consider to be abuse of the exemption we can expect further restrictions to be introduced.

“It is to be hoped that HMRC will review the £50 cap regularly so that the exemption continues to be worthwhile.”

The 2007 Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) Regulations will be changed to apply the exemption to former employees and the annual cap to trivial benefits in kind provided to former directors and office holders and members of their families and households.

Draft secondary legislation for these changes was also published yesterday.

Date published 10 Dec 2015 | Last updated 10 Dec 2015