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.
The rules
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.
Multi Directorships
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.
Spouse
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.
More information
Draft guidance from HMRC on this is set out at:
Helen Wheatley says
“The odd drink after work with staff or celebratory meal? Charging your mobile phone (or even electric car) at work? Even pinching the office stationery for your kids”
But for those of us who don’t do any of those things? I don’t even have an ‘at work’ as I have a Ltd co I run from home and so don’t bill the company for electricity. If I take a client to dinner, that’s a different expense category, but I don’t do that either.
But even so, why would you ‘pinch office stationery’ worth a few pence when you could actually buy a useful gift worth up to £50 in the spot?
DavidW says
Here’s the problem. The £300 limit has to cover all the small things that HMRC would regard as a “benefit” as it is there as, essentially, a de minimis reporting requirement. Exploit it in this way and you are exposing yourself to a tax charge on every other tiny “benefit” and, moreover, a penalty for not reporting them. The odd drink after work with staff or celebratory meal? Charging your mobile phone (or even electric car) at work? Even pinching the office stationery for your kids, for goodness’ sake! All of these things and more may be regarded by HMRC as taxable benefits and are tax-free only because the aggregate amount of them is “trivial” (ie. less than £300 in a year). So you need to take great care in exploiting this “loophole” lest you tip the overall figure (including the benefits you probably have not even realised are benefits) over the £300 limit.