By Lynne Gowers on 6th March 2020

Tax Talk – mobile phone and trivial benefits

In our new Tax Talk blog series, we’ll be exploring topical tax issues and updates to guidance which may affect our clients and readers.

This month we look at HMRC’s recently revised provisions for tax exemptions on mobile phones. We’ll also consider the trivial benefits exemption, with a reminder that there is still time to use the annual allowances before the end of the tax year.

‘Allo ‘allo: updated rules for 2 mobile phones

Providing mobile phones to company directors and employees is a tax free benefit so long as the phone contract is directly with the company and the bills are paid directly from the company bank account.

HMRC have recently confirmed that it is possible for an employee or director to have two tax free mobile phones.

These are being dealt with under different provisions from HMRC:

1) A company can provide every employee with one mobile phone as a tax exempt benefit, regardless of this being for personal use. It must be in the company’s name.

2) A company can provide a further mobile as an asset, and where the private use is insignificant, it can avoid a benefit in kind on this under the asset rules. Any significant use would deem this an asset and the normal rules apply (this is simply a charge allocated to 20% of the market value at purchase).

Note that this does not extend to mobiles provided under a salary sacrifice arrangement, or given to a member of the employee’s family.

Trivial Benefits – still time use annual amounts before 5th April

From 6th April 2016, trivial benefits became recognised by HMRC and included in their guidance.

Where the following apply, an employer may provide trivial benfits to their employees without any tax implications or reporting obligations:

● Less than or equal to £50 (VAT inclusive)
● Not cash or a cash voucher
● Not a reward for their work or performance
● Isn’t in the terms of their contract

Trivial Benefits for directors

In a close company (less than 5 “participators”), a director can receive up to £300 in any tax year, in accordance with the above conditions. You can also provide trivial benefits to other family members who are not employees or directors, these will be included as part of your directors’ allowance for the year.

Providing it’s not cash, the gift could be anything, including high street vouchers, store gift cards or wine.

Treating your employees

Providing the conditions outlined above are all met, you can treat your employees to small gifts and entertainment without having to include these within PAYE settlement agreements or disclose on P11D forms, making it a lot simpler.

Common examples include a hamper or turkey at Christmas, or flowers to celebrate a birthday or the birth of a baby.

The tax exemption for trivial benefits can also be used more liberally for employee celebration meals. For example, it is common to use trivial benefits where it is impractical to operate a detailed analysis of a bill. E.g. 5 employees attend a meal with a total cost of £240, this would average out at £48 a head and be a trivial benefit.

An example of where this wouldn’t work would be if all employees got a bottle of wine, with 20 bottles bought for employees and 5 bottles bought for directors, which averaged out at £15 per bottle. However if the actual cost of the directors’ bottles was £140, only the employees’ wine would be covered under the rules, not the directors.

You can find out more about the trivial benefits tax rules, including some working examples in our Knowledge Base.

Written by Lynne Gowers
Disclaimer Although we attempt to ensure that the Information contained in this publication is accurate and up-to-date at the date of publication it may not be comprehensive, we accept no liability for the results of any action taken on the basis of the information they contain and any implied warranties, including but not limited to the implied warranties of satisfactory quality, fitness for a particular purpose, non-infringement and accuracy are excluded to the extent that they may be excluded as a matter of law.

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