Subsequent to previous guidance issued to schools on 'benefits in kind' to staff such as free evening meals at restaurants, lunches on inset days and direct payments for the running of after school clubs.
Where a school has provided a 'benefit in kind' or other untaxed income to a member of staff, whether this has been funded from the school’s delegated budget, private school fund or by parental contributions, then this should have been formally recorded within the school and reported annually to us.
HMRC (Her Majesty's Revenue and Customs) has now published new guidance on this matter and have given employers a new statutory exemption for ‘trivial employer provided benefits in kind’.
The new ruling will see an ‘employer to employee’ benefit in kind as exempt from tax and National Insurance contributions if the following conditions are met:
- the cost of providing the benefit does not exceed £50 for each benefit item or averages below £50 per employee if the benefit is provided to a group of employees and it is not possible to work out the exact cost for each individual and the benefit is also
- not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)
- not part of any contractual obligation
- not cash or a cash voucher
To qualify for the statutory exemption the benefit has to be related to employee welfare and goodwill, not employment service or performance.
The type of trivial benefits that the HMRC identify as being allowed provided that the cost of the benefit does not exceed the £50 limit, include:
- taking a group of employees out for a meal to celebrate a birthday
- buying each employee a Christmas or birthday present
- flowers on the birth of a new baby
- a summer garden party for employees
For example, if a school takes ten members of staff to a local restaurant to celebrate a birthday and pays £30 per person there would be no need to report this to HMRC, although the school must keep a record to show the new rules have been met. If the amount per individual exceeds £50 then the names of all staff members will need to be declared and the taxable benefit for each individual will be the whole amount and not just the amount in excess of £50.
If however, the meal is provided as a reward for services or because of something they have done as part of their employment duties, for example, a 'well done' meal for a top performing team or employee then the exemption from tax cannot be applied and the benefit amount is taxable in full.
Some examples of what is not allowed under the exemption include:
- providing a working lunch for employees (because this is related to their employment) except where a school meal is provided from the school canteen to staff on lunchtime supervision or lunchtime club duty
- gifts, incentives or events related to performance targets or results
- gifts, incentives or events in relation to employment services
Lunches provided on inset days are covered by a separate exemption on normal meals and refreshments offered during work related training. This covers things such as the provision of a meal prepared in the canteen, sandwiches brought in or a pizza delivery. In this scenario the exemption removes any possible tax charge. Again the school should keep a record of the total cost and number of staff provided with a free lunch.
The form attached to this page enables schools to provide us (via the Shared Services Centre) with details of instances where taxable ‘staff entertainment’ has taken place, where the amount is in excess of £50 or if the amount is taxable in full. This will then be confirmed by us to HMRC.
Please note that it is a legal requirement for all schools who have provided 'benefits in kind' that do not meet the four conditions listed or if any untaxed income is given to staff to formally notify us of its value.
This information should provide you with sufficient guidance to enable you to provide the Shared Services Centre with the required P11D information.
The new statutory exemption rules are outside of our control and must be applied as described above. However, should you wish to discuss any aspect of this matter further please email: firstname.lastname@example.org or contact either Peter Buckley, tel: 01629 535511 or Paul Crowder, tel: 01629 538791.