What are trivial benefits and when are they tax free?
Posted on 2nd August 2018
A small gesture of thanks can have a big impact on employee satisfaction, morale, and productivity. For employers, so called trivial benefits can make a big difference in the daily operations of a company and the good news is that many can be classed as tax free and don’t require legal paperwork. And yes, this can apply for directors of small companies too! Don’t miss out!
Since 2016, trivial benefits, maybe a box of chocolates for a Friday afternoon or a team drink out, can be given without having to put it on the P11D form, and comes without any tax or national insurance for either party.
However, to take advantage of the tax benefits, there are a few rules that you need to stick to:
The total sum of the trivial benefit must cost you £50 or less to provide
It cannot be given as cash or a cash voucher
It isn’t a reward that’s related to the employee’s work or performance
The trivial benefit isn’t written in the terms of their contract
It’s also important to note that if trivial benefits are offered as part of a salary sacrifice arrangement, you won’t be exempt from tax. In these circumstances, either the salary given up and how much you have paid in trivial benefits, which ever is higher, will need to be reported on a P11D form.
There isn’t a limit on trivial benefits that each employee can receive, so technically you could spend up to £50 each working day so long as it still meets the four basic requirements listed above.
Note: We always advise that business expenses are paid for directly from the company - and in this case, it would not be possible to reimburse yourself for trivial benefits as that would be seen as a cash payment.
Important Note: If you're a director of a "close" company, you can't receive trivial benefits that total more than £300 over the course of a tax year.
So, what kind of things can trivial benefits be used for?
It can be a little tricky to understand when trivial benefits can be used for.
The tax-free benefits are perfect for purchasing gifts as a token of appreciation, such as a bottle of wine. However, they couldn’t be given as a reward for hitting performance targets for example. Another example is that you could take staff members out for a meal that costs up to £50 per head as part of a birthday celebration but not as a celebration of securing a new contract.
Trivial benefits are a great way for incentivising staff without having to worry about extra paperwork or additional costs and for directors of a small company to get an added £300 of perks for the year!
Get in touch to discuss how you might be able to make use of this for your business.
Nicola J O'Sullivan -
Founder | Xero Champion | IR35 Expert
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