Trivial Benefits - Nothing Trivial Here
In April 2016 HMRC introduced a tax exemption for “trivial benefits“, meaning that small gifts and entertaining costs given to employees could be given free of tax and National Insurance up to the value of £50. The ‘gift’ must be ‘just because’ and for individual reasons such as a birthday, new baby, or just a happy day and thus not a reward for services. Hooray for happy Fridays!
Previously you would have had to report this on a P11D or needed a settlement arrangement and either you as the employer or your employee would’ve paid tax on these, which isn’t much of a present if you’re paying tax on it!
Do bear in mind that any benefit, entertaining or gift costing over £50 would usually be subject to the normal benefits in kind rules, (other than staff annual parties and events, see our last blog), so if you give one of your team members a present and the cost is £51 the whole amount becomes fully taxable, not just the excess.
We feel this is a great way to give your staff Christmas or birthday present, or perhaps a gift for something else throughout the year, or you could use it on a team lunch, an after work pizza or Friday beers. As long as the cost of this is less than £50 per employee it will fall under the trivial benefit rules and not be taxable, yet still a deductible cost in the business, and there is no limit on the amount of trivial benefits you can give throughout the year.
The conditions are that are:
The gift or benefit must cost less than £50 to provide (and this would include VAT)
It cannot be a cash gift or equivalent cash voucher, but other non-cash vouchers would qualify
It cannot be a reward for a particular service or performance attained
And lastly it isn’t a contractual obligation and is not set out in your employee’s contract of employment.
These rules do not apply if there is a salary sacrifice agreement already in place as these two benefits won’t be exempt.
As a director(s) you can also benefit from this, but you must be a small business and a ‘close company’ controlled by five or fewer shareholders, but this is capped at £300 per individual in a tax year. So if you’re a director and employer and you’re buying your team a Christmas or birthday gift for under £50, don’t forget to buy one for yourself too!
FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.
