A proposals to introduce a statutory tax exemption for trivial benefits in kind (BIK) on spends up to £50 has been dropped from the Finance Bill 2015.
With the deferral of the exemption, employers will need to continue to rely on imprecise guidance and informal agreements with HM Revenue and Customs (HMRC).
The changes were due to come into force on 6 April but will be legislated at the earliest opportunity in the new Parliament and introduced in a later bill.
The £50 tax exemption would have been on items such as birthday and Christmas gifts. The legislation would have also introduced an annual cap of £300 in some circumstances.
The reform was first announced in the Office of Tax Simplification’s review of employee benefits and expenses.
The government also deferred a new tax exemption for travel expenses of members of local authorities, which was first announced in July 2014.
Steve Wade, employment tax director at KPMG, said: “Current examples that HMRC accepts as ‘trivial’ benefits in kind are 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.
“We had been expecting this Finance Bill to include measures to introduce a statutory exemption for trivial benefits in kind costing less than £50 from 6 April 2015.
“However, the 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.
“Employers will need to continue to be careful that small gifts are not considered taxable benefits in kind if they want to avoid the scenario in which a well-meant gesture results in a staff member getting a tax bill. Many employees would be astonished that the gifts could be taxable.
“As this was a relatively uncontroversial and easy-to-legislate proposal, it is surprising that it 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 organisations.The delay will also provide HMRC with additional time to consider their promised guidance on the new legislation.”
The Finance Bill 2015 Bill, which has now been published in full by the government, introduces tax changes announced at Budget 2014, Autumn Statement 2014 and Budget 2015.
These include:
- Increasing the personal allowance to £10,600 on 6 April and again to £11,000 from April 2017.
- The appropriate percentage points for company cars.
- Extension of the pension flexibilities to annuities and pension death benefits.
David Gauke, financial secretary to the Treasury, said: “The government is committed to supporting hardworking families and backing business.
“That is why we are making it easier for them to keep more of their hard-earned money and access the help they need to grow.
“The legislation builds on our efforts to create a stable tax system that supports our long-term economic plan.”
