Class 1 NICs liability disregard for certain trivial benefits in kind
15 December 2016
The disregard will only apply to qualifying trivial BIKs provided on or after the 28 November 2016 and will not be retrospective.
6 April 2016 saw a new exemption brought in that removed liability to income tax for low value ‘trivial’ benefits in kind (BiKs). Prior to this date, an administrative practice was needed for employers to reach agreement with HMRC that certain BiKs could be treated as trivial and so would not need to be reported to HMRC at the end of the tax year.
This was replaced by the statutory exemption replaces administrative practice.
Guidance on the new exemption can be found in Employment Income Manual 21860.
To qualify as a ‘trivial BiK’ conditions A-D must be met:
- Condition A – the BiK must not be cash or a cash-voucher;
- Condition B – the BiK must cost £50 or less;
- Condition C – the BiK must not be provided as part of a salary sacrifice or other contractual arrangement; and
- Condition D – the BiK must not be provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.
There is no limit to the number of trivial BiKs that can be provided to an employee in a tax year where all conditions are met, unless Condition E applies.
Condition E applies an annual £300 cap where a trivial BiK (that meets conditions A to D) is provided by an employer that is a close company to an employee who is a director or other office-holder of the close company or member of the family or household of a director or other office-holder of the close company.
Changes have been made to the ‘Employer-Financed Retirement Benefits’ (Excluded Benefits for Tax Purposes) Regulations 2007 (‘the EFRBS Regulations’). The regulations came into force from 1 December 2016 and have effect from 6 April 2016.
This ensures qualifying trivial BiKs provided to former employees, or to members of their family or household, also benefit from the exemption and are subject to the close company cap.
Further guidance can be found in the Employment Income Manual 15033.