In April 2016, new regulations were introduced allowing employers to provide ‘trivial benefits’ to employees without reporting them to HMRC. But what constitutes a trivial benefit, and how do you ensure it remains non-taxable?
Trivial benefits are not a new concept; employers have always had the option to give such perks.
As the term suggests, these are small, insignificant benefits, different from more substantial perks like company cars or gym memberships, which are taxable. Items can include the provision of tea and coffee, bottled water and infrequent gifts such as flowers or chocolate to celebrate a Birthday or special occasion.
The 2016 rule change brought a benefit which allowed directors to be more generous to both staff and them. However, to avoid tax or national insurance charges, certain rules must be followed.
- There is a limit on the value of the benefit, it cannot exceed £50
- The benefit cannot be a cash payment, vouchers are allowed as long as they are not converted in to cash.
- The benefit cannot be part of an employee’s contract.
- Any benefit must not act as a substitute for salary or as a reward for services provided.
- Any Director must not receive more than £300 in benefits over a 12-month period.
If a benefit exceeds the £50 limit, its full value becomes taxable. Moreover, these benefits cannot be claimed as an annual allowance without receipts for each expense.
As previously mentioned, trivial benefits cannot be given as rewards for work. For example, if a £50 bottle of alcohol is given as a reward for good work, then this would be taxable. Instead, it should be a gesture of goodwill, like treating employees to a meal.
If you are a Director, please take note!
For directors or office holders of close companies (those with five or fewer shareholders), there’s an annual cap of £300 on trivial benefits. Directors can also provide such benefits to family members or household members, including these in their annual allowance. All other conditions must be met.
It is worth noting that trivial benefits are additional to the ‘annual event’ or staff entertainment allowance, currently set at £150 per person, covering food, drink, accommodation, and transport costs.
Trivial in Name, Significant in Impact
When kept under £50 and within the rules, trivial benefits are excellent for workplace morale, cost-effective, and can be claimed for corporation tax relief. While the monetary value is small, the gesture of appreciation can have a significant impact.
If you have any questions or would like to discuss this further please call our team on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.
You can also book a free 20-minute call with Yarka – https://calendly.com/yarka-ssa/20min
