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.