This corker (excuse the pun) of a tax loophole has just come to my attention.
The new “trivial benefits exemption” introduced earlier this year means that, as a director of a limited company, you can purchase multi bottles of wine (costing less than £50 each) up to a maximum of £300 of wine in any one year.
Yes – HMRC have introduced a tax loophole allowing you to buy wine through your limited company – what a result!
Of course if you do not like wine the benefits can be anything else as long as the rules, below, are followed.
To qualify for this benefit you do need to keep within the rules, which frankly shouldn’t be arduous:
- The benefit must not exceed £50
- It must not be cash or a cash voucher
- The benefit must not be a contractual obligation or in recognition of a service performed – so do not buy yourself wine for doing a good job but buy it because there the sun is shining (or some other ridiculous reason not connected to performance)
- The total benefits are capped at £300 per year
Note – further rules may apply; so it is always best to check the detail with your accountant.
And of course if you are a director of more than one limited company you can exploit this rule through each of your directorships.
Presents and Gifts
Within the £300 maximum and £50 per item limit, as a director you can also give “benefits” to members of your household; so you could buy your (living at home) children a computer game (less than £50) or your spouse a pair of socks.
Although if your spouse is a director they too get benefit from this loophole – so an extra £300 allowance with a maximum of £50 per “benefit”.
Note for accountants – Brainless HMRC
You have got to wonder why HMRC did not apply the same rules as for the Employment Allowance. Surely someone could have foreseen the potential to exploit this little gem of a tax rule.
Draft guidance from HMRC on this is set out at: