A Benefit in Kind (BIK)
A Benefit in Kind (BIK) is a benefit on which Tax and National Insurance is due. The most common taxable benefits employers/close companies take up or give to their directors and employees are;
- Assets given to employees (most commonly shares given to employees)
- Cheap or free loans
- Christmas parties where the total cost per head is above £150
- Company Car or Van for personal use
- Credit Cards
- Fuel provided for personal use
- Gym Membership
- Living Accommodation
- Private Medical Insurance
- Services supplied where the contract for the service is between the employer and the supplier
Where benefits in kind are taxable, Income Tax is normally due by the Director/employee and Class 1A National Insurance is paid by the employer on the taxable value of the benefit.
The taxable value of the benefit is most commonly the cash equivalent value paid during the tax year.
However, company cars have special rules where the list price and the value of any accessories on purchase/lease of the car less any capital contributions are used in conjunction with the CO2 Emissions rate to calculate the value of the benefit.
Different values are also used for personal usage of company vans and any provided fuel. Rates for 2018/19 and 2019/20 below
Tax Free Benefits
There are some tax free benefits which employers may wish to consider passing along to their employees
- Employer payments to a pension
- In-office facilities such as a work gym
- Meals provided by the company, unless there are salary sacrifice arrangements in place
- Up to £8,000 in relocation expenses if job related.
- Personal gifts not connected to the job (not including cash)
- Mobile phone (If the contract is between the employer and the mobile service provider)
Employers can also make further use of trivial benefits for their employee, a benefit in kind is considered 'trivial' and is not taxed if it satisfies all of the following:
- Less than £50 in value
- Not cash or a cash voucher (e.g. a gift card that can be used as cash)
- Not a reward or bonus for doing well in your job
- Not part of your employment contract
- Not a part of a salary sacrifice
Trivial benefits that would be allowable could include the following
- Taking a group of employees out for a meal to celebrate a birthday
- Buying employees Christmas presents
- Flowers for special occasions such as an engagement
It is important to note that there is an annual cap of £300 for office holders of close companies and employees who are family members of those office holders.
Should you require any Tax advice on Benefits on Kind our team is ready to help you and you can contact us on 01224 573 904 or on firstname.lastname@example.org.