Trivial benefits – Know the score

Have you got employees in your business? Good to get clear on this one with Christmas approaching…

What is a trivial benefit? A benefit you can give to your employee without having to pay any payroll related tax or national insurance on it. You also don’t need to let HMRC know.

A ‘token gift’ from employers to employees.

What’s covered? The following must apply:

  • It can’t be cash or a cash voucher.
  • It cost you (the employer) less than £50 to provide (including VAT).
  • It’s not a reward for their work or performance related.
  • It’s not in the terms of their contract.

Examples – HMRC give the following examples:

  • Taking a group of employees out to celebrate a birthday.
  • Buying employees a Christmas or birthday present.
  • Flowers on the birth of a baby.
  • A summer garden party for employees.

What happens if it doesn’t meet the above? The benefit would be taxed in the normal way, via a P11D. That’s the form used to report benefits in kind provided to employees.

How about if it’s for more than £50? Unfortunately the whole benefit will become taxable. Important to be aware of, it could be costly if you get that one wrong ☹

What’s the limit? Employees can receive multiple trivial benefits throughout the year, as long as each one doesn’t exceed the £50 limit.

Close Company? A close company is one with 5 of fewer ‘participators’ or shareholders, or a company where all the shareholders are also directors. The rules for directors of these companies cap trivial benefits at £300 for the tax year.

James Watson