HMRC defers ‘trivial’ benefits in kind exemption

Due to cross-party disagreement, employers risk being wrong-footed by last-minute changes to the Finance Bill 2015 which have put paid for the moment to a proposed exemption from income tax for trivial benefits in kind, such as giving employees a bunch of flowers or box of chocolates

In a written statement to parliament David Gauke, financial secretary to the Treasury, said that the government has decided to defer a number of previously announced measures to a future Finance Bill, in recognition of the ‘accelerated parliamentary process’ that the bill will be subject to because of the impending general election.

Among the measures left out to make way for a number of priority measures announced at Budget 2015 which will be included in the bill, is a new statutory exemption from income tax for trivial benefits in kind.

This move follows the implementation of a recommendation of the Office of Tax Simplification, which reviewed employee benefits and expenses.

The proposal would have exempted small benefits of up to £50 from 6 April 2015, provided they were not in recognition of services, part of a contractual obligation or in conjunction with a salary sacrifice arrangement.

Mark Groom, tax partner at Deloitte, said that the proposal was well received by employers as a simplifying measure and a means of ensuring consistency between different types of benefit and between different employers.

‘Under current rules, which will now continue to apply, it has been necessary for employers to agree with HMRC which benefits they provide count as trivial.  Welfare-focussed benefits seem to be commonly approved by HMRC up to around £50, although not all HMRC officers will agree to the same limit, while for other benefits, HMRC agreement can depend on the nature and quantum of the benefit concerned.’

Steve Wade, employment tax director at KPMG in the UK, said current examples that HMRC accept as ‘trivial’ benefits in kind include small gifts such as a bouquet of flowers given to an employee to celebrate a personal event, such as the birth of a child, or small items such as a box of chocolates given to an employee for Christmas.   

‘However, today’s ministerial statement makes clear that these proposals have been deferred.  What this means is that employers will need to be careful to ensure that any small gifts they give to staff continue to meet the current, relatively informal and imprecise definition. 

‘Some employers may already have agreements in place with HMRC as to the maximum value of a “trivial” benefit in kind.  They will need to either stick to or renegotiate these arrangements until the actual statutory value and definition is introduced,’ Wade said. 

Wade said he was surprised that a relatively uncontroversial and easy to legislate proposal has been delayed.

‘A possible  additional reason for the delay may be the £300 cap announced in last week’s budget as an anti-avoidance measure on gifts to family members in close companies. The delay will also provide HMRC with additional time to consider their promised guidance on the new legislation,' said Wade.

Gauke’s statement said a number of other clauses have also been deferred ‘as a result of discussions with the Opposition in the context of the end-of-parliament wash up process.’

These are:

  • A new tax exemption for travel expenses of members of local authorities (announced July 2014);
  • Simplifying link company requirements for consortium claims under Corporation Tax (announced Autumn Statement 2014);
  • Changes to scheme rules for the Enterprise Investment Scheme and Venture Capital Trusts (announced at Budget 2015) - on which draft legislation has just been published and which are subject to EU State aid approval;
  • A separate rate of excise duty for aqua methanol (announced at Budget 2014).

The government says that it intends that measures deferred to a future bill will be legislated at the earliest opportunity in the new parliament.

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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