Are you making the most of ‘Trivial Benefits’?

A guest blog by qualified chartered accountant Ruth Chettle, Canary Accounting

We all love receiving gifts.

Receiving a gift from your employer can make you feel all warm and fuzzy and can do wonders to boost your team.

As with most things, HMRC have various rules in place when making gifts to employees and as an employer you are required to be aware of them as they may need to be reported and additional tax may be due.

HMRC have published guidance for employers to provide trivial benefits without the reporting or additional tax requirements.

So lets take a look in a little more detail…

What is a trivial benefit?

You don’t have to pay tax on a gift (or in official terms, a benefit) for your employee if all of the following conditions are met:

• It cost you £50 or less to provide (including VAT)
• It isn’t cash or a cash voucher (gift vouchers are allowed as long as you cannot exchange the voucher for cash)
• It isn’t a reward for their work or performance
• It isn’t in the terms of their contract.

When all criteria are met, the benefit is known as a trivial benefit.

You don’t need to inform HMRC of what you have provided and there is no extra reporting or tax or National Insurance payable.

Examples of trivial benefits

The types of trivial benefits that are allowed include:

• Taking a group of employees out for a meal to celebrate a birthday
• Buying each employee a Christmas present
• Flowers on the birth of a new baby

Examples of benefits that do not class as trivial benefits

• Providing a working lunch for employees (this is related to their employment)
• Gifts, incentives or events related to performance targets or results
• Gifts, incentives or events related to employment services such as team building events

Important point to watch out for!

If the cost of the benefit is over £50 even by 1p then the WHOLE amount is taxable not just the excess over £50. 

Where the individual cost cannot be estimated accurately, for instance if it’s a group event, then you can calculate the average cost per employee which is acceptable.

Is there a limit on the amount of trivial benefits I can provide?

For normal employees there are no limits to the amount of trivial benefits you can provide in a year.

Can I take advantage of these ‘trivial benefit’ rules as a director of my own Limited company?

If you are a Director of a ‘close’ Limited company you can still make use of the trivial benefits however, you are limited to a maximum of £300 each year (6 x £50).

A ‘close’ company is a Limited company with five or fewer shareholders who are all directors.

Ruth is a qualified Chartered Accountant and has spent the last 12 years working in local Northamptonshire accountancy practices where she managed a portfolio of clients ranging from individuals to limited companies. She decided to take the leap and set up her own practice in January 2020. She specialises in looking after individuals and owner-managed businesses and can offer a range of services for all your accountancy, taxation and business support requirements. Her aim is to make accounting and tax less stressful, more affordable and make things as easy for you as possible.

To find out more about trivial benefits or anything else related to your accounts, get in touch with Ruth - canaryaccounting.co.uk