UK Government defers trivial benefits exemption

7th April 2015

Plans to make limited company contractors and other small employers exempt from having to report trivial benefits have been shelved by the Government for the time being.

As a result, contractors and small firms must continue to use HM Revenue and Customs’ (HMRC) “imprecise” guidance and “informal” agreements they have for any benefits in kind under £50.

Previously, employers will have been considering changing their processes to reflect the commencement of an exemption for trivial benefits in kind under £50, but they will now have to revert to the original rules.

Although the decision will appear controversial in the eyes of small business owners, tax legislation experts are largely supportive of the £50 threshold not going ahead – at least for now.

A spokesperson for the Association of Taxation Technicians said: “We felt that HMRC’s understandable zeal to eliminate scope for potential abuse of the proposed exemption had undermined its very purpose; namely the removal of the administrative burden of reporting tax and NIC on low value benefits.

“We are therefore pleased to see that the measure has been dropped from the pre-election Finance Bill.

“We hope that the Revenue will use the time afforded by the postponement to reconsider the finer details of some aspects of the policy.”

Steve Webb, employment tax director, KPMG, believes the delay can be attributed to a £300 cap on gifts to family members in close companies being recently announced as an anti-avoidance tax measure.

The cap, which was unveiled at Budget 2015, was not labelled the cause of the delay by the Treasury, which it said owed to the “accelerated parliamentary process” that the bill was subjected to.

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