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Who is likely to be affected?
- Employers (and others) who pay for and
employees who receive:
- long service awards;
- annual parties;
- a gift from a third party, i.e. not
the employer; and
- meals or refreshments provided on cycle
to work days.
General description of the measure
Long Service awards
- At present an employer can make a tax-free
award such as a clock, watch etc. (but not
cash) to an employee in recognition of the
length of service. The employees have to have
a minimum of 20 years with the employer, and
the gift can be valued at up to £20 for
each year of service. Thereafter an additional
tax-free gift can be awarded for each further
period of 10 years service. It is intended
to increase the limit from £20 to £50
for each year of service. The qualifying period
will remain the same.
Annual Party
- An annual party or similar celebration
paid for by an employer and open to employees
generally is exempt where the cost is not
more than £75 per head per annum. It
is intended to increase this amount to £150.
Third Party Gifts
- An employee who receives a gift (but not
cash) from a third party can receive that
gift free of tax if its value is £150
or less. It is intended to increase this amount
to £250.
Meals for those taking part in cycle to
work days
- The requirement to report a benefit in
kind when an employer provides a meal or refreshments
as an incentive to employees to participate
in cycle to work days was removed with effect
from 6 April 2002. The legislation limits
the number of occasions on which an employer
can provide meals or refreshments to 6 a year.
It is planned to remove this limit. The criteria
setting out when these meals or refreshments
can be provided tax free remains unchanged
i.e. that they have to be provided as part
of official cycle to work days.
Operative date
- As soon as amending regulations come into
force.
Current law and proposed revisions
- Benefits-in-kind, provided by employers
for employees are taxable and liable for National
Insurance contributions (NICs) unless covered
by a specific exemption or an extra-statutory
concession. The exempt benefits outlined in
this measure are all covered by specific legislation
in the Income Tax (Earnings and Pensions)
Act 2003 and are mirrored for NICs in the
Social Security (Contributions) Regulations
2001.
- They were until recently covered by ESC's
A22, A70 and SI 2002 No 205. The exemption
limits in this legislation will be amended
by regulation to reflect the proposed changes:
- the annual amount payable for long service
will be increased from £20 to £50
for each year of service;
- the amount allowed for the cost of an annual
party will be increased from £75 to £150
per head per annum;
- the value of a gift received by an employee
from a third party will be raised from £150
to £250; and
- the limit on the number of cycle to work
days on which meals can be provided to participating
employees is removed.
All of these changes will reduce reporting
and record keeping requirements for employers.
Further advice
- If you have any questions about this change,
please contact the Public Enquiry Unit on
020 7438 6420 to 6425.
www.inlandrevenue.gov.uk
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