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Government proposes Benefits-in-Kind tax relaxation

The Government intends to relax the rules on the taxation of Benefits-in-Kind (BiK) for employees, it has been revealed.

Under the proposed changes, low-value BiKs will be exempt from income tax and national insurance contributions, up to a limit of £50 per individual BiK, providing they meet certain qualifying conditions.

The new rules are due to come into force from 6 April 2016 after the next Finance Act.

Those employers footing the bill for an employee leaving party, or those who wish to pay for stationery for staff members who work from home could be affected.

Currently, HM Revenue and Customs (HMRC) can choose to use discretion when deciding which BiKs should be subject to tax. Those benefits that are considered trivial are exempt from any taxation. Work Christmas parties, for example, are usually exempt from BiK tax.

However, the BiK taxation rules are not set in stone.

The Government predicts that the softening of the rules will relinquish £5 million in taxes during 2016/17, and an annual amount of £10 million afterwards.

The alteration is predicted to cut administration costs for both the Government and employers.

Furthermore, ‘close company’ directors and senior employees may benefit from the tax relaxation – such people may be eligible to receive £300 in BiKs before a tax bill is generated.

The changes to the taxation of low-value BiKs were initially proposed by the Office of Tax Simplification (OTS) within the 2014 Budget as part of a package of measures designed to simplify UK tax legislation.