Trivial benefits are small gifts or perks 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.
There is no specific limit on the frequency of trivial benefits provided to employees. This is as long as each benefit individually meets the qualifying conditions.
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. HMRC sets this cap at £300 and taxes any benefits exceeding this amount.
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 from 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
Employers do not report trivial benefits to HMRC and treat them as 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 an employer fails to meet any of the previously listed conditions, they cannot treat the benefit as trivial and must consider it taxable.
For example: If the cost exceeds £50 or the employer gives the benefit as a reward for performance, they must report it and pay tax on it.
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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