UK200Group members comment on the relaxation of benefits-in-kind tax rule
Members of the UK200Group of independent accountancy and law firms have today commented on HM Revenue & Customs (HMRC) decision to relax the tax rules regarding benefits-in-kind from next year.
Under the new rules, any benefit valued at £50 or less, paid for by an employer, will not be subject to tax or national insurance (NI).
Qualifying ‘trivial’ Benefits-in-kind 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.
Currently, HMRC is able to use its discretion to decide what sort of benefits-in-kind should be taxed, or which are deemed trivial. However, from 6 April 2016 the new relaxed rules will be come into force.
Jonathan Russell, partner at UK200Group member firm ReesRussell, said:
“‘Relaxation’ of benefits-in-kind rules to remove trivial items is long overdue. The reporting level has not changed for many years and now even someone on the minimum wage could be falling foul of the need to report a benefit – say a company-funded taxi for an early start or a late finish or a meal allowance when working away, when the company has not had a dispensation.
“If HMRC had enforced the current rules as strictly as they could have, then a huge number of employers and employees would find themselves caught with small amounts of tax and national insurance owing.
“However, HMRC has neither the resources nor the commercial desire to pursue tax or NI from these benefits as the costs of management and collection would far outweigh any tax take.
“This is a good case of realism being brought into the tax system, but it also means that with the rules better clarified, compliance for the non-trivial amounts will, I suspect, be more actively applied.”
Andrew Jackson, head of tax at UK200Group member firm Fiander Tovell LLP, said:
“This is an excellent development, and one that I was disappointed to see removed from the 2015 Finance Bill.
“The reality is that trivial benefits like this happen every day; it is part of what makes the world go round. Flowers to mark a special (or sad) occasion, small gifts, and so on; tax on them is the last thing anyone expects.
“I think almost every employer could be seen to be (strictly speaking) in breach of the rules occasionally, and so putting it beyond doubt that this sort of thing is acceptable is very welcome. Tax is moving a little bit closer to the real world.
“I rather suspect that the £300 limit per employee per year would be hard to track, and so perhaps the goalpost moves from ‘was this individual item trivial?’ to ‘was the aggregate trivial?’, but in the vast majority of cases the situation will be much simpler.
“In terms of tax and NI saved, I suspect that at the moment they are frequently paid only if HMRC pick the issue up when they do compliance visits. So although it probably won’t save much for employers, it does take away some of the worry of a PAYE audit.
“On the other hand, it might have a slight negative impact on the performance statistics of HMRC’s enquiry teams. They should be given a little present or two to make up for it.
“I doubt employers will offer many extra benefits, but if taking a bit of the tax worry away allows for people to have a few more minor perks, then that can only help make workplaces that little bit happier.”