March 2nd, 2020Trivial benefits – £300 worth of benefits per year from your company tax-free
HMRC have accepted in previous years that some benefits were so trivial that they would not be taxable under certain circumstances. However, you were required to call the Employer line to ask if this treatment could be applied.
From 6 April 2016 this has changed and new legislation has been brought in which exempts income tax on trivial benefits to an employee or member of the employee’s family under the conditions below:
- the benefit is not cash or cash voucher (can be retail vouchers though)
- the cost of providing the benefit is less than £50
- the benefit is not provided under salary sacrifice arrangements
- the benefit is not in recognition of a work-related duty
What I mean by ‘trivial benefits’ is basically anything the company provides you with that costs less than £50. So, I’m thinking books, wine, theatre ticket, gift cards.
The main motivation behind the introduction of the statutory exemption is simplification and the provision of certainty and transparency for employers along with reducing the administrative cost to HMRC! However, the law makers also recognised that owners of small limited companies may abuse these rules so a cap of £300 per director has been imposed (there is no limit for normal employees).
With the new tax burden that the introduction of the new dividend tax has imposed on directors of owner-managed businesses, this is a nice little way to get a little bit out of the company without paying additional tax – and every little bit helps! If your spouse is an employee and director of the company then that’s £600 per year for your household.
There are some pitfalls to look out for:
- any benefits provided to a family member are included in the director’s £300 limit
- if the individual benefit is more than £50, the whole amount is taxable as a benefit-in-kind, not just the excess
So, get creating a new account code in your software to keep track of trivial benefits and make sure you get your £300 worth out for 19/20!
