Contractors have been warned that a proposed exemption from reporting trivial Benefits in Kind (BIK) has been shelved.
The plans, announced in the Autumn Statement, were designed to exclude expenses that cost less than £50. Such items include a bouquet of flowers or small items such as a box of chocolates.
The new rules were set to form part of Finance Bill 2015, but were dropped at the last minute due to “recognition of the accelerated Parliamentary process that the bill will be subject to.”
As a result, contractors will have to stick with the “imprecise guidance and informal agreements” that they have with HMRC. Those who have already changed their policy in light of the changes will need to revert back to their old ways.
Tax experts are largely in favour of the change. The Association of Taxation Technicians (AAT) said: “We felt that HMRC’s understandable zeal to eliminate scope for potential abuse of the proposed exemption had undermined its very purpose; namely the removal of the administrative burden of reporting tax and NIC on low value benefits.
“We hope that the Revenue will use the time afforded by the postponement to reconsider the finer details of some aspects of the policy.”
Steve Wade, employment tax director at accountancy firm KPMG, said he was “surprised” that the changes had been shelved. He claimed a possible explanation for the U-turn could be the introduction of a £300 cap to curb tax avoidance on gifts to family members in close companies.
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