Policy paper

Draft legislation: Income Tax exemption for trivial benefits in kind

Further information on the statutory exemption for trivial benefits in kind and proposed amendments to existing regulations.

Documents

The Social Security (Contributions) (Amendment No. X) Regulations 2016

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Explanatory memorandum to the Social Security (Contributions) (Amendment No. X) Regulations 2016

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The Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) (Amendment) Regulations 2016

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Explanatory memorandum to the Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) (Amendment) Regulations 2016

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Technical note

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Details

At Budget 2014, the government announced a package of measures to simplify the tax treatment of employee benefits and expenses, helping to reduce employer burdens. This package included a statutory exemption for low value benefits in kind (‘trivial BiKs’). Legislation to exempt from Income Tax trivial BiKs costing £50 or less, where certain conditions are met, was deferred from Finance Act 2015 and has now been included in Finance Bill 2016. Following comments made during an earlier consultation, an annual cap of £300 will apply to the amount of exempt trivial BiKs that can be provided to directors and other office-holders of close companies, or to members of their families or households.

To ensure the exemption, and the annual cap, applies equally to trivial BiKs provided to former employees, amendment will be made to the Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) Regulations 2007. Changes will also be made to the Social Security (Contributions) Regulations 2001 to disregard from the calculation of earnings attracting a Class 1 National Insurance contributions liability any non-cash vouchers that meet the trivial BiKs exemption.

A technical note has been published to provide examples of how the extension of the exemption to former employees, and the annual cap for close companies, will work in practice.

HM Revenue and Customs has also published draft regulations, together with draft explanatory memorandum, for a period of technical consultation which will close on 3 February 2015.

A tax information and impact note has also been published.

Any comments on these drafts should be sent to named contacts in the respective documents.

Published 9 December 2015