Benefits-in-Kind (BiK)

What Are Tax Efficient Benefits-in-Kind (BiK)?

Now the P11d process is fresh in everyone’s mind it is worth considering a few tax efficient BiKs.

 

Fully Electric Company Cars

The tax position for directors and employees provided with fully electric company cars, for private use, is incredibly generous and really worthwhile!

The relevant taxable benefit in kind percentages are as follows:

2020/21: Nil

2021/22: 1%

2022/23: 2%

Accordingly, the taxable benefit currently is now 2% × the list price. The chancellor also confirmed that employees with fully electric company cars will be taxed on the 2022/23 benefit in kind rate of 2% for 2023/24 and 2024/25.

Example

Alan is a director of a company. The business recently bought a fully electric company car for Alan to use for both business and private purposes. The car’s list price was £40,000. For the current tax year, 2022/23, he will be taxed on 2% of the list price. Accordingly, he will be taxed on a benefit of £800, for the current tax year.

 

• This is a really low taxable benefit in kind. If he is a 40% taxpayer, he will only pay tax of £320 for 2022/23 in respect of this fully electric car. His package aligned to the use of this fully electric company car includes:
• unlimited private mileage and use of the car in the evenings and weekends;
• free charging up of his car each day at work;
• his employer paying for and fitted a charging point at Alan’s home;
• his employer insuring the car for both business and private use. The insurance premium that the employer paid was £1,800;
• the employer repairing the company car when necessary;

 

Trivial Benefits

Trivial benefits are very popular and are frequently given by employers to directors and employees.

A trivial benefit is one that:

 

• costs £50 or less to provide (including VAT);
• if it is a retail store voucher, cannot be converted into cash;
• the benefit is not given in recognition of services performed;
• effectively acknowledges a personal event relating to the employee;
• is not reimbursed;
• the employee is not contractually entitled to receive the benefit.

Examples when a trivial benefit has been given –

Christmas;

Easter;

Religious festivals;

Engagements/weddings/birth of a child;

Examples of some trivial benefits that employers have given to staff:

Christmas hampers;

Store vouchers;

Tickets for an event.

Where the payment is made to a director of a close company, there is a £300 cap on the exempt trivial benefits which can be provided in the tax year to the director.

 

Late Night Taxis

Late night taxis paid for and provided by an employer to staff are exempt from tax.

However, there are certain late working conditions, which must be satisfied by the employee. These include that:

• the employee is required to work later than usual and until at least 9 pm;
• this occurs irregularly;
• by the time the employee ceases work, either: public transport has ceased; or it would not be reasonable to expect the employee to use public transport.
• The number of journeys in the tax year must be not more than 60.

For any advice on tax planning, please feel free to get in touch with us below.