Trivial Benefits

Chris Stedman
Senior Partner
June 21, 2021
5 min read

In general the value of any benefit provided by an employer to an employee constitutes part of the employee’s employment income and is fully taxable. In addition the employer has to pay class 1A NIC on many such benefits. It is very sad.

Over the years HMRC has relented. It has compiled a comprehensive list of non-taxable payments or benefits including some backup notes, all of which can be accessed here. These are useful.

It was largely understood that HMRC would turn a blind eye to certain de minimus expenses and benefits. From April 2016 legislation was introduced providing clarity as to what small benefits could be regarded as “trivial” and therefore exempt from tax and reporting obligations.

In true HMRC style the legislation set out a number of conditions to be satisfied if benefits are to be classed as trivial. These are:

  • 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 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 any arrangement involving salary sacrifice).
  • 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.

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.

HMRC provide some examples of trivial benefits and again in true style these are down-played:

  • Taking a group of employees out for a meal to celebrate a birthday.
  • Buying each employee a Christmas present or birthday present.
  • Providing a bunch of flowers on the birth of a new baby.
  • Arranging a summer garden party for employees.

However an astute employer can be much more creative and still stay within the limits of the legislation. For example employees will probably be much more appreciative of an Amazon gift card, a quality pen with name engraved, an IT knick-knack, a bottle of whisky or brandy…the list is endless.

Do remember that £50 limit and don’t forget that VAT must be included. If any of the conditions are not satisfied then the whole of the benefit will be taxed in the normal way.  It would be a pity if your employees were asked to stump up some tax months later. The shine would certainly be lost.

Call us at C&H if you need clarification or support.

C&H Stedman
For more info, give us a call on 01442 202650

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