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August Q&As

Q1. I have five employees who I recently took out for dinner to celebrate the success of the company. The total cost of the meal was £225. Do I have to report this as a benefit-in-kind to HMRC?

A: Finance Bill 2016 legislates for a new tax exemption relating to trivial benefits, which broadly means that if the cost of providing the benefit does not exceed £50 per employee, you will not have to account for it to HMRC, and the employees will not have to pay tax and NICs on it.

The cost of the benefit is defined in the legislation as:

– the cost of providing the benefit; or
– if the benefit is provided to more than one person and the nature of the benefit or the scale of its provision means it is impracticable to calculate the cost of providing it to each person to whom it is provided, the average cost per person of providing the benefit.

So, although different employees will have chosen different food and drinks, HMRC will accept that the cost per head can be taken as £45 (£225/5). The benefit of the meal will therefore be covered by the exemption as the cost per employee did not exceed the £50 trivial benefit limit. You will not have to report it to HMRC.

Q2. Is there any update on Finance Bill 2016 Progress?

A: There has been much speculation on when the Finance Bill 2016 will receive Royal Assent. According to the latest information, all stages of the Bill have been provisionally scheduled to take place in the House of Lords on Tuesday 13 September. It is expected that Royal Assent will be achieved shortly after that time.

Q3. How long do I need to keep VAT records for?

A: VAT-registered businesses must:

– keep records of sales and purchases;
– keep a separate summary of VAT; and
– issue correct VAT invoices

In the UK, VAT records must be kept for at least six years (or ten years the trader uses the HMRC VAT mini-one-stop-shop (VAT MOSS) service. VAT records may be kept on paper, electronically or as part of a software program (e.g. book-keeping software) – but whichever method is used, the records must be accurate, complete and readable. HMRC can visit businesses to inspect record-keeping and impose penalties if the records are not in order.

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