HMRC has published guidance allowing employers to provide trivial benefits without reporting them.
You don’t have to pay tax on a benefit for your employee if all of the following apply:
- it cost you £50 or less to provide
- it isn’t cash or a cash voucher
- it isn’t a reward for their work or performance
- it isn’t in the terms of their contract
This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.
You have to pay tax on any benefits that don’t meet all these criteria.
Salary sacrifice arrangements
If you provide trivial benefits as part of a salary sacrifice arrangement they won’t be exempt. You’ll need to report on form P11D whichever amount is higher:
- the salary given up
- how much you paid for the trivial benefits
These rules don’t apply to arrangements made before 6 April 2017 – check when the rules will change.
Examples of a Trivial benefit
The type of trivial benefits that are allowed include:
- Flowers
- Chocolate
- Wine
- Hampers
- Taking staff out for a meal, so long as it is not a reward for their work or performance.
- Gift vouchers (these are allowed but only as long as they can not be exchanged for actual cash. They should also be purchased at separate times from online retailers such as Amazon/Tesco – don’t go for six vouchers from the same place at the same time or this will be viewed as a single benefit)
If the cost of the benefit is over £50, the whole amount is taxable, not just the excess over £50. In situations where the individual cost cannot be estimated accurately due to being a group event, calculating the average cost per employee is acceptable.
The type of benefits not allowed under the exemption include:
- Providing a working lunch for employees (because this is related to their employment)
- Gifts, incentives or events related to performance targets or results
- Gifts, incentives or events in relation to employment services e.g. team-building events
- Taxis when employees work late.
- Ongoing or reoccurring cost i.e. yearly gym membership, annual broadband cost
- Cash vouchers (vouchers you can redeem for cash)
Is there a limit?
For Directors of “close” companies can’t receive trivial benefits worth more than £300 in a tax year.
A “close” company is a limited company with five or fewer participators (shareholders) who are all directors.