There is nothing trivial about Benefits in Kind 29 March 2016
Or is there? From 6 April 2016 a package of measures will be brought in that aim to simplify what is arguably one of the more complicated areas of employment income – Benefits in Kind (BIK).
One of the measures will see the introduction of a long awaited statutory exemption for trivial benefits which will for the first time provide employers with greater certainty on what is, and more importantly what isn’t a BIK, that can be considered Trivial.
Under this exemption, if an employer provides a benefit to their employees, the benefit will be exempt from tax as employment income if all the following conditions are satisfied:
The cost of providing the benefit does not exceed £50 - or an average cost per employee where a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person. The benefit is not cash or a cash voucher – although non cash vouchers will be allowed. The employee has no contractual entitlement The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties. Where the employer is a close company and the benefit is provided to an individual who is a director or other office holder of the company (or member of their family or household) the exemption will be capped at a total cost of £300 per year. This is to be known as the annual exempt amount.
HMRC published draft guidance in February which provides a range of good examples that help to demonstrate how the exemption will be applied.
Tick-Tock time is running out to register to use HMRC Payrolling Benefits in Kind online service 29 March 2016 Of the package of four simplification measures due to come in from 6 April 2016, voluntary payrolling has the potential to provide the biggest change to current employer processes for employers who will have, by 5 April 2016, registered to use HMRC Payrolling Benefits in Kind online service. As from 6 April and for those employers who have, by 5 April 2016, registered with HMRC Payrolling Benefits in Kind online service they will be able to take advantage of the regulatory framework that will be in operation to enable employers to voluntarily payroll benefits in kind (BIKs). Voluntary payrolling will provide a regulatory process for the employer to take the value of the ‘cash equivalent’ of the benefit in kind, and apply a proportion of it to each pay period identified for the coming tax year, thus accounting for the collection of tax in real time. For an employee who is regularly paid and who is provided with the same or similar package of BIKs each year, this should prove to be a relatively straightforward process.
Reportable expenses and BIKs for the 2015/16 tax year will need to be reported, as before, on form P11D for income tax to then be collected by way of an adjustment to the tax code.
Excluded from voluntary payrolling, for the present time at least, is: Accommodation beneficial loans, and credit tokens and vouchers (Spring Budget 2016 announced that measures are to be actioned to include these by April 2017)
There is no change being made to how the ‘cash equivalent’ of the benefit in kind is worked out and nor will this process impact on the calculation of Class 1A NICs or processing of P11d(b).
Pre-registration is a vital element of voluntary payrolling and for employers who wish to begin voluntary payrolling, they will need to register with HMRC’s new Payrolling of Benefits In Kind registration service (PBIKs). Employers should, however, not do this before they have discussed the subject with their software provider or their payroll provider. Be aware also that existing informal payrolling arrangements with HMRC will be phased out from 5 April 2016. Employers who choose to register to begin voluntary payrolling will no longer be required to report ‘payrolled’ benefits in kind on a form P11D neither will they need to submit form P46 cars. Other benefits in kind that are not processed through voluntary payrolling will however still need to be reported to HMRC on the P11D.
CIPP Policy News Journal
25/04/2016, Page 158 of 453
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