Our dedicated Technology team can support your business locally, nationally, and internationally.
The benefit in kind legislation contains a number of exemptions whereby certain benefits provided to employees do not need to be reported to HMRC and are not chargeable to tax or NICs.
20 April 2021
By Rebecca Tubman
The benefit in kind legislation contains a number of exemptions whereby certain benefits provided to employees do not need to be reported to HMRC and are not chargeable to either tax or Class 1A National Insurance Contributions.
In order to benefit from these exemptions, HMRC usually requires the employer to provide the benefits in a prescribed way, meeting the criteria it sets out and not spending more than a certain amount.
It is therefore important to consider the available exemptions in advance of providing certain benefits to your employees, as sometimes a gift or event costing just £1 more than the limit could cause the entire amount to be treated as a benefit in kind.
There is an exemption for any non-cash benefit that you give to your staff that costs you £50 or less to provide, as long as the benefit is not a reward for work or performance and is not in the terms of their contract.
This exemption can cover gifts to staff for occasions such as Christmas or birthdays, as well as small ad hoc benefits during the year. If a benefit costs in excess of £50, the entire amount would be chargeable as a benefit in kind, unless another exemption applied.
There is no limit to the number of trivial benefits an employee or director can receive, unless the company is a close company (this being a company that is run by 5 or fewer shareholders), in which case the directors are limited to trivial benefits costing no more than £300 in total.
This exemption applies to annual events to which all employees are invited, provided the total cost per attendee is no more than £150 per head. The annual events exemption most commonly covers the annual Christmas party but can also cover events at other times of the year, provided they are annual.
The exempt amount of £150 per head can be split across a number of events during the year – if an employer provided a Christmas event costing £70 per head and a Summer event costing £75 per head, both events can be covered by the annual events exemption.
If an event costs more than £150 per head, the entire amount (and not just the amount in excess of £150) would be chargeable as a benefit in kind.
An exemption applies to a non-cash long service award given to an employee, provided the following conditions are met:
For example, you can give a non-cash award with the value of up to £1,000 for 20 years’ service if no award has been given previously.
An employer can pay additional household expenses to any employee who works from home, provided they need to work from home and the amount is not more than the limit of £6 per week for 2020-21 onwards.
This is covered in more detail in our remote working blog.
An employee can also be provided with one mobile phone, which can be used for private use, without a benefit in kind charge arising provided the contract is in the employer’s name.
Please see our taxable benefit blog for more details, where the contract is in the name of the employee.
Where your employees pay for annual membership/subscription to professional organisations, this will be exempt provided it is approved by HMRC.
A full list of approved subscriptions can be found here: Approved professional organisations and learned societies (list 3).
Further education and training costs can also be paid for by the employer free of tax consequences if the training is work-related and any other costs (i.e. staff entertainment for group activities) is incidental.
An employer can also provide an employee with up to £500 of pensions related advice without incurring a benefit in kind charge.
The cost of one medical health check-up per year is exempt from tax.
Where required by health and safety legislation for employees who use a computer monitor or other screen, the employer can also pay for one employee eye test per year.
If the test shows that the glasses / contact lenses are for both general and VDU use, a proportion relating to the VDU use will be exempt. However, there must be a special prescription for VDU for the exemption to apply.
The costs of helping employees return to work where they have been absent for at least 28 consecutive days are also exempt provided these do not exceed £500.
Finally, an employer can provide welfare counselling for its employees without any benefit in kind charge arising.
Access to sports facilities provided to employees will not be a taxable benefit where these facilities are available to all employees, are not available to members of the public, and are used wholly or mainly by employees or former employees and members of their family or household.
Free or subsidised meals provided at a workplace canteen, and working lunches on the employer’s premises, are also covered by an exemption provided they are available to all staff (whether or not all staff chose to partake) and that they are on a “reasonable scale”.
Workplace nurseries can also be exempt from reporting requirements, provided the childcare is available to all employees and the employer (or a small group of likeminded employers) provide the childcare premises.
If you have any queries or require our assistance in reviewing the benefits you provide to your employees, please contact your normal Bishop Fleming contact or a member of the Employer Solutions team.
For more information on employer issues check out our Employer Solutions Knowledge Hub.
We'll send you relevant insight, events and analysis from our technical, sector and service teams - straight to your inbox.
