Tax-Efficient Benefits-in-Kind

Tax-efficient benefits-in-kind (BIK) are non-cash benefits provided by an employer to employees that have little or no tax liability. They can be a valuable way to reward employees while minimizing the tax burden for both the employer and the employee. Here are some tax-efficient benefits-in-kind:

1. Company mobile phones: If an employer provides an employee with a mobile phone for business and personal use, it is generally exempt from tax and National Insurance contributions, provided the contract is between the employer and the phone provider.
2. Parking: Employers can provide free parking spaces at or near the workplace for their employees without incurring any tax or National Insurance liabilities.
3. Annual staff events: Employers can host annual staff events, such as Christmas parties or summer barbecues, without incurring a tax charge, provided that the cost per attendee does not exceed £150 (including VAT) and the event is open to all employees.
4. Interest-free loans: Employers can provide interest-free loans of up to £10,000 to employees without triggering a taxable benefit. This can be used for any purpose, including helping employees with the cost of commuting or relocation.
5. Provision of office or computer equipment: Employers can provide office equipment, such as computers, laptops, or tablets, to employees for business use without incurring a tax charge. If the equipment is also used for personal purposes, it may still be exempt, provided the private use is insignificant.
6. Homeworking expenses: If an employee works from home, an employer can pay up to £6 per week (£26 per month) tax-free to cover additional expenses incurred due to homeworking, such as heating and electricity costs. No receipts are needed to claim this allowance. If the employer pays more than this, the employee must provide evidence to justify the higher payment.
7. Trivial benefits: Employers can provide trivial benefits, such as small gifts or tokens of appreciation, without incurring a tax charge, provided that the cost of the benefit does not exceed £50, it is not cash or a cash voucher, it is not provided in recognition of the employee’s work performance, and it is not a contractual entitlement. There is no limit to the number of trivial benefits an employer can provide to an employee, but for directors and other officeholders of close companies, there is an annual cap of £300.

These tax-efficient benefits-in-kind can be valuable tools for employers to reward and motivate employees while minimizing tax liabilities. However, it is essential to consult HMRC guidance, such as the Employment Income Manual (EIM), and seek professional advice to ensure compliance with tax rules and regulations.

You can call us to discuss your employer’s tax compliance and obligations with our specialist tax advisors.