trivial benefits

Legislation was introduced a few years ago providing clarity on what HMRC will consider to be a trivial benefit and therefore exempt from tax and reporting obligations.

This is a useful bit of legislation and perhaps not that widely known about.

The rules allow employers to provide benefits of up to £50 per employee and providing the following conditions are met, no tax charge arises:

  • the cost of providing the benefit cannot exceed £50 per employee (including VAT)
  • the benefit is not cash or a cash voucher (but gift cards would qualify as long as they are not exchangeable for cash)
  • the employee is not entitled to the benefit as part of any contractual obligation (including under
    salary sacrifice arrangements)
  • the benefit is not provided in recognition of particular services performed (or in anticipation of such services) or as part of their normal employment duties

In most instances, an employee can receive multiple trivial benefits throughout the year, as long as each one does not exceed £50. However, where the employer is a close company, the exemption is capped at a total cost of £300 in the tax year where the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household).

EXAMPLES OF TRIVIAL BENEFITS

As per HMRC’s guidance, some types of examples of trivial benefits are:

  • taking a group of employees out for a meal to celebrate a birthday (this could be covered by the £150 employee entertaining allowance if it hasn’t already been used)
  • buying each employee a Christmas present or birthday present
  • flowers on the birth of a new baby
  • a summer garden party for employees

The aforementioned is on the basis that the benefit per employee does not exceed £50. There are many other tax efficient ways of providing benefits to staff. If you would like further information on trivial benefits or benefits in general, please contact us.

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