Have you heard of Trivial Benefits? Maybe not.
Have you heard of the tax free Turkey? Almost certainly not.
But I'm guessing you've heard of tax efficiency, and this one is a good one.
What is a Trivial Benefit?
A Trivial Benefit is a small gift given to staff members that follows a number of conditions:
- It costs you £50 or less to provide
- It isn't cash or a cash voucher (redeemable for cash)
- It isn't a reward for their work or performance
- It isn't in the terms of their contract (or via salary sacrifice arrangements)
If all of these conditions are met, the benefit is known as a trivial benefit. This means there's no need to inform HMRC, and the benefit won't count towards taxable income or NI contributions. They also don't need to be reported on your P11d's!
Examples of Trivial Benefits
It's important to understand a couple of scenarios here to make sure you don't fall into a tax trap.
The benefit must not cost more than £50 to provide. If it costs £51, the full amount is taxable, not just the £1 extra.
In the odd scenario where you cannot give exact costs per employee, you can use an average cost per employee (for example, a meal out for 5 employees costing £210 is less than £50 per head).
Some examples might include:
- Taking a group of employees out for a meal to celebrate a birthday
- Small gifts such as employee Christmas presents (eg. bottle of wine under £25, or a voucher as a replacement should they not drink)
- A gift on the birth of a new baby
- A turkey provided to staff members at Christmas (subject to it being under £50)
Some things don't fall under these rules:
- Providing a working lunch for staff
- Gifts or incentives for achieving targets at work or rewarding promotions
- Events in relation to employment services e.g. team building events
- Taxis for employees when working late
Is there a limit on these?
Directors of "close" companies are restricted to a maximum of £300 per tax year, so a maximum of 6x £50 benefits in the year.
A close company is one with five or fewer shareholders who are all directors.
The trivial benefit rules are separate to those for annual parties like Christmas or Summer parties.
Please check with your accountant whether your scenario would fit the rules before purchasing or providing this.