From April 2016 new rules were introduced to allow employers to provide their directors and team members with certain “trivial” benefits in kind tax free.
The new rules were brought in as a simplification measure so that certain benefits in kind do not now need to be reported to HMRC as well as being tax free for the team member. There are of course a number of conditions that need to be satisfied to qualify for the exemption. Conditions for the exemption to apply are:-
- the cost of providing the benefit does not exceed £50
- the benefit is not cash or a cash voucher
- the team member is not entitled to the benefit as part of any contractual obligation such as a salary sacrifice scheme
- the benefit is not provided in recognition of particular services performed by the team member as part of their employment duties (or in anticipation of such services)
So, this exemption will generally apply to small gifts to staff at Christmas, on their birthday, or other occasions and includes gifts of food and wine.
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.
Gifts to Charity
Where possible, higher rate taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity and for the individual to obtain additional tax relief on the payment.
For example, where an individual makes a £20 cash donation to charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self-assessment, reducing their net cost to £15.
Note that the donor is required to make a declaration that they are a UK taxpayer and those that have not suffered sufficient UK tax to support the Gift Aid amount will be taxed on the shortfall.
Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell your donated items on your behalf and are able to treat the sale proceeds as Gift Aided donations. It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.
If you would like further advice on gifts and Gift Aid, give us a call on 01733 371180.