Trivial benefits are staff benefits in kind which can be provided without incurring tax.
From April 2016 legislation was introduced to allow employers to provide tax-exempt gifts and entertainment. However, for benefits to qualify as a trivial benefit the following conditions must be met: –
- The cost of providing the benefit must not exceed £50 per employee (including vat)
- The benefit must not be cash or a cash voucher
- The employee must not be entitled to the benefit as part of a contractual obligation (including under salary sacrifice)
- The benefit must not be provided as a reward for particular services performed
If any of these conditions are not met then the benefit must be taxed in the usual way via the P11D form, PAYE Settlement Agreement or through the payroll.
An employer can provide an employee with multiple trivial benefits throughout the year as long as one does not exceed £50. Examples of trivial benefits per HMRC guidance are as follows:
- Taking a group of employees out for a meal to celebrate an event
- Buying each employee, a Christmas or birthday present
- Flowers on the birth of a new baby
- A summer garden party for employees
However, if 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 a director or other office holder of the company or a member of their family or household.
To determine whether a benefit can be treated as trivial it must be the cost to the employee that is considered and not the cost to the employer. It is also important to note that the cost of providing a benefit can be the provision of one item or event or a series of items or events which together can be classed as a single benefit. For example, if an employer provides flowers costing £25 as a birthday gift together with a bottle of wine costing £10, then the total cost of the benefit is £35.
It is necessary for employers to keep a record of all benefits provided to employees whether they are trivial or not. As if HMRC carry out an employer compliance review they will require this information to ensure the correct tax and national insurance are being applied to the benefits provided.
Please note that benefits provided which do not fall under the trivial benefit exemption must still be reported to HMRC either on a P11D form, on PAYE Settlement Agreement or through the payroll.
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