Government shelves trivial benefits exemption

Limited company contractors and other small employers are being warned that an exemption from having to report trivial benefits which was due to apply from yesterday has been shelved.

It means that contractors and other employing companies must stick to using the taxman’s “imprecise” guidance and “informal” agreements they have with him, for any BIK under £50.

If they don’t, adds KPMG’s employment tax director Steve Webb, then a “well-meant gesture” like a box of chocolates for an employee’s birthday, could result in them getting a tax bill.

It also means that employers who had changed their processes to reflect the April 6^th commencement of an exemption for BIKs under £50 will have to revert to the original rules.  

But for those whose systems were not fine-tuned for the proposal, which was spelt out at Autumn Statement 2014, it is now ‘business as usual,’ says advisory Crowe Clark Whitehill.

But tax legislation experts are largely supportive of the £50 threshold not going ahead, at least for now, which the Treasury confirmed in a statement.

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”.

As to why the delay has come about, KMPG’s Mr Webb put it down to a £300 cap on gifts to family members in close companies being recently announced as an anti-avoidance measure.

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