Trivial Benefits
A trivial benefit is a small gift or perk provided to an employee that costs £50 or less. To qualify as a trivial benefit, the gift must meet the following criteria:
- It costs £50 or less to provide, including VAT.
- It isn’t cash or a cash voucher.
- It isn’t a reward for their work or performance.
- It isn’t specified in the terms of their employment contract.
Common examples of trivial benefits include:
- Taking employees out for a meal to celebrate a birthday.
- Tickets to a concert or sporting event.
- Christmas hampers or a bottle of wine.
- Flowers for the birth of a new baby.
Trivial Benefits for Directors
For directors of ‘close’ companies (typically defined as having five or fewer shareholders), there is a cap on the value of trivial benefits they can receive tax-free in a tax year. This cap is set at £300 and any benefits exceeding this amount will be taxable.
The £300 cap applies to each director individually but also includes any benefits provided to family members or members of the director’s household. Family members typically include the director’s spouse, civil partner, children and the children’s spouses and partners.
While trivial benefits are exempt for tax and National Insurance Contributions up to the £300 cap, they are still business expenses. Businesses must ensure that such expenses are legitimate business expenditures and not personal benefits disguised as company expenses.
Tax Implications
Trivial benefits do not need to be reported to HMRC, and they are exempt from tax and National Insurance Contributions. This makes them a popular choice for employers who wish to provide small tokens of appreciation to their employees throughout the year.
However, if any of the conditions previously listed are not met, the benefit will not be considered trivial and will be taxable. For example: If the cost exceeds £50, or if the benefit is given as a reward for performance, it must be reported and will be subject to tax.
Exclusions
Trivial benefits provided under a salary sacrifice arrangement are not exempt. If the benefits are part of such an arrangement, you will need to report the higher of the amount of salary given up or the cost of the benefits on a P11D form.
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