Q: With Christmas upon us, we are looking to give our employees a gift over the festive period. What Benefit in Kind would arise from this if any?

 

A: Under section 323A ITEPA 2003 there is a statutory exemption that allows employers to give their employees a gift without a BIK charge, subject to specific criteria requirements that need to be met.

Section 323A sets out the following conditions for the trivial benefit exemption to be satisfied:

  • the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person) (see EIM21865)
  • the benefit is not cash or a cash voucher (see EIM21866)
  • the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements) (see EIM21867)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services) (see EIM21868)

If the main criteria requirements are satisfied then the employer can give their employees a Christmas gift that won’t attract a BIK charge. If the employer decides to give the employees a cash gift then the treatment for this would follow the normal process under Section 62 ITEPA 2003 and would be both taxable and NICable as earnings through the payroll.

However, be aware that the trivial benefits exemption works differently for company directors and other officers of close companies. There are additional restrictions imposed by sections 323A (1), (2) and (10) and 323B ITEPA 2003 to prevent abuse. Where the employer is a close company (see CTM60060) and the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household), the total value of benefits that can be treated as exempt trivial benefits is capped at a total cost of £300 in the tax year. This is known as the annual exempt amount. Where the company provides benefits that it considers are trivial, it will need to keep suitable records to demonstrate that this amount has not been exceeded.

 

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