New rules for expenses and benefits in kind – Gifts for employees
From 6 April 2016 new rules were introduced to allow employers to provide their directors and employees with certain “trivial” benefits in kind, tax-free.
The new rules are a simplification measure so that certain benefits in kind will not need to be reported to HMRC, as well as being tax free for the employee. To qualify for an exemption, the following criteria must be met:
- the gift does not exceed £50, including gift wrapping
- the gift is not cash or a cash voucher
- the employee is not entitled to the gift as part of any contractual obligation such as a salary sacrifice scheme
- the gift is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)
This exemption will apply when it relates to small gifts to employees at Christmas or on their birthday. If the value of the gift is more than £50, it will be taxable and should be included on the employee’s P11D, or dealt with under a PAYE settlement agreement.
Note that 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, the exemption is capped at a total cost of £300 in the tax year.