Tax group welcomes moves to tighten up rules on employer gifts under £50

Have you been given flowers by your workplace after having your baby or when you went on maternity leave? Did you know they could be subject to tax?

The Low Incomes Tax Reform Group says that some employees have faced calls from HMRC for tax on such gifts from their employers and is backing new legislation which aims to stop workers being taxed on similar low value benefits.

It says the current rules governing what constitutes a tax-free trivial benefit are too subjective and can leave employees shocked and confused as to why they end up having to foot a tax bill for receiving a minor item. This can happen if an employer gives a benefit that they think is trivial to an employee, but HMRC disagrees and say it is subject to tax and National Insurance contributions.

The LITRG supports the introduction in April of new, clearer, statutory rules on trivial benefits which mean employees and employers will not have to pay tax on items below £50 and which meet other new conditions* for the exemption.

However, it says the new £50 statutory limit on benefits that can be received without tax should be kept under constant review as prices rise. It also wants to see action to ensure those on tax credits and other means-tested benefits do not have to report and potentially have money deducted from welfare payments when they receive trivial benefits.

Anthony Thomas, LITRG Chairman, said: “We expect the change should mean that employees do not face the shock and confusion of a tax charge on items that neither they nor their employers in practical terms view as a taxable benefit. This should help companies with their administration of their businesses and frankly allow workers to enjoy what has been given to them without worrying about the cost.

“The new statutory exemption will help to clarify what is a trivial benefit in kind and we welcome a movement towards a more ‘principles based system’ rather than the current subjective one. It is vital that the £50 limit is kept up-to-date, otherwise the exemption will become obsolete very quickly and not provide the long term simplification of administration which this is designed to achieve.

“Legislation for tax credits, Universal Credit and means-tested benefits should be amended, if necessary, to ensure that exempt trivial benefits are ignored for these purposes. This is important, as the employee in receipt of the trivial benefit will have no record of its value.”

*A trivial benefit will qualify for the exemption if it meets four conditions: it costs less than £50, it is not cash or a cash voucher, it is not part of a salary sacrifice arrangement and it is not provided in recognition of the employment.

Picture credit: Wikipedia.

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