Tax-free Perks Blog

One of your suppliers has tickets to next year's Olympics, and has offered a few to you free of charge. Can the directors and employees of your company use these without getting hit with a tax bill?

Perks of the Job

You dont need to be an expert to know that where you recieve a benefit-in-kind (BiK) from a company of which your'e a director or employee, the Taxman counts the value of this as part of your salary and charges you tax and your company NI accordingly. But what do the rules say where a business contact offers you a free perk in the form of tickets to a sporting or other event?

By Reason of Your Employment

The rules for determining whether a BiK is taxable are very wide. If you were brave enough to wade through the main tax legislation regarding job-related perks, you would likely come to the conclusion that there no chance that any BiK, no matter how tenuously linked to your job, could be tax-free. But if you dig deeper into the small print, there are some tax breaks.

Tax-free Gifts

S.324 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) says that some gifts from third parties, e.g. a supplier or customer, are exempt from tax even though they are clearly linked to your job. For this expemtion to apply the following conditions must be met:

the gift didnt come from your company
neither your company nor anyone connected with it procured the gift. A business contact doesn't count as "connected"
the gift is not given in recognition of services provided to the donor in the course of your job
the gift isnt cash or use of services from the donor
the cost of all gifts made by the donor to the same person isnt more than Â£250 in the same tax year.

Extra Value Entertainment

The trouble is that tickets to major events like the Olympics or even a music festival could cost more than Â£250, especially if this included travel costs. There's good news though. For gifts which count as entertainment, this includes tickets to any sort of event or even a paid-for meal at a swanky restaurant, theres no monetary limit.

Tip: The exemption applies not only to you but also to member of your family, So if a grateful supplier offers you a few tickets to, say, one of the athletics events in the main Olympics stadium, you can take your sports mad son or daughter along without fear of being clobbered with a tax bill.

Ther Services Catch

The third condition might catch you out where the person benefiting from the entertainment has performed some service for the donor. For example, if your company provided office machinery and one of your staff visits the customer who made the gift to service the equipment. If they were to recieve free tickets it might look like they were being rewarded specifically for their work. Our view is that the Taxman is unlikely to be concerned as long as the gift is made to your company rather than an individual and you simple pass the gift on. Buf if you want to be sure we have a solution.

Tip: Allocate the tickets etc. on a first-out-of-the-hat basis, that was its a matter of luck who gets the perk and if they happen to have worked for the donor, all the better!

Summary

If you recieve a gift of entertainment, e.g. tickets to a sporting event , from a third party, such as supplier or customer, you wont have to pay tax on this, although some conditions apply. This tax break extends to your family and friends so if you're lucky enough to recieve more than one ticket, they can come along too.

If you would like any more information or advice about tax, please don't hesitate to get in touch with us on 0191 386 4786

Tax-free Perks Blog

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