Employers who forget Trivial Benefits risk decidedly non-trivial tax bills
“Employers will be thinking about completing their PAYE Settlement Agreement over the next few weeks and many will not be aware of, or will have forgotten, the Trivial Benefits exemption,” says Tim Stovold, head of tax at Kingston Smith. “They could end up paying large amounts of tax and National Insurance needlessly.
“Employers who put on social events for their employees normally enter into an arrangement (the PAYE Settlement Agreement) with HMRC to pay any income tax and National Insurance due on the benefit so that employees have no liability. This has been a potentially very expensive exercise for an employer. For an employee who normally pays tax at 40 per cent, the effective rate of tax and NI payable by the employer on the benefit is nearly 90 per cent – which can discourage employers from providing employee entertainment.
“However, from April last year a new ‘trivial benefit’ tax exemption was introduced, but with little fanfare. This exempts jollies for employees which cost the employer £50 or less per employee for each event from tax and NI benefits. This exemption could cover a weekly drinks event so the tax free benefit the employee receives in the course of a year could be £2,600!”