Budget 2003: Minor Changes to Employee Benefits; Increased Allowance for Staff Parties

The Chancellor has introduced some changes to minor benefits that could reduce employment costs or allow employers to be a little more generous towards their employees.

The most popular will be the increase of the annual employee party exemption from £75 to £150 per head. For those employers who run events that already cost in excess of £75 per head this will lead to a reduction in the tax charges that are normally picked up on behalf of employees. It should also provide a welcome boost for the corporate hospitality industry.

Employers that supply non-cash gifts to the employees of other organisations can also increase the annual tax free cost of the gifts they supply from the current value of £150 to a value of £250 per employee.

There is also some benefit for long-serving employees, with a minimum of 20-years service. Current legislation allows employers to provide a non-cash long service award that equates to a value of £20 per year of service. It is intended to increase this value to £50 per year so after 20 years an employee's award could be worth as much as £1,000. However, the 20 year qualifying period will not be reduced.

Finally, for those employees who cycle to work, employers have been able to provide, (since April 2002) meals and refreshments on a tax free basis up to 6 times a year. It is now intended to remove this limit, so meals and refreshments can be provided tax free for cyclists on a routine basis.

These minor benefit exemptions are currently on a non-statutory basis but are now being covered by specific legislation. The changes will be introduced as soon as amending regulations come into force.

Of all the measures the annual party exemption is likely to have the biggest impact as it could give employers the chance to increase the budget of an event or schedule a Summer staff party as well as the usual Christmas event.
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