Trivial benefits

Newsletter issue - July 2016.

Employers will be aware that various changes have been made to the reporting requirements for employee benefits and expenses from April 2016, which mean that some employers will no longer have to complete annual return forms P11D. The three main changes are:

Until 5 April 2016, employers were required to agree with HMRC whether benefits could be treated as 'trivial' but legislation included in Finance Bill 2016 (inserting new ITEPA 2003, s 323A to 323C) will provide for an exemption for trivial benefits and, if enacted, this will apply from 6 April 2016.

The proposals provide for an income tax and national insurance contributions (NICs) exemption from 2016-17 for trivial benefits where the following conditions are met:

Trivial benefits provided to directors or other office holders of close companies (broadly, those with five or fewer participators), or to members of their families or households, will be capped at £300 per tax year.

Where an employee receives a benefit exceeding £50, the whole amount becomes taxable, not just the excess, and it must be accounted for accordingly.

The exemption applies equally to benefits provided to an employee, or to a member of his or her family or household, subject to the £50 limit.

The government will be monitoring the use of the exemption, and if it believes it is being abused, adjustments to the qualifying conditions and/or the annual cap are likely.

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