What are trivial benefits? An explanation of the staff benefits you can give without incurring tax. From April 2016, legislation was introduced providing clarity as to what small benefits are deemed to be trivial and therefore exempt from tax and reporting obligations.
Conditions to be satisfied
– the cost of providing the benefit cannot exceed £50 per employee (including VAT), or the average cost per employee if provided to a group of employees and it is impracticable to work out the exact cost;
– 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.
If any of these conditions are not satisfied then the benefit is taxed in the normal way – via a P11D, PSA or taxed through the payroll. Also, if the cost of the benefit exceeds £50, the whole amount will be taxable rather than just the excess.
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
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
– 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.