Trivial Benefits Exemption – a good thing from HMRC

Under old HMRC rules, gifts to employees were taxable, however from 6 April 2016 there are now exemptions.

The Exemption

To be classed as a trivial benefit exemption, the benefit must meet the following criteria:

  • the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person)
  • it cannot be cash or a cash voucher (however gift vouchers for a shop are included in the exemption)
  • the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements)
  • is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)

For a non director employee there is no limit to the number of individual benefits in a year, although please bear in mind the more regular the payment, the more likely it could be viewed as a contractual obligation or a recognition of a service, both of which remove the exemption.

Directors in a close company are limited to £300 per tax year of benefits and this covers their household. Assuming they live together, if it is a husband and wife company, the £300 is for both of them, not £300 each.

What kind of payments generally fall under the exemption?

From HMRC’s guidance, examples of trivial benefits that are allowed are:

  • Taking a group of employees out for a meal to celebrate a birthday
  • Buying each employee a Christmas present
  • Flowers on the birth of a new baby
  • A summer garden party for employees

Summary

HMRC have been quite generous with this exemption and with careful planning can see tax savings if used correctly, even for one director company’s. If you would like further assistance or information on this, please call Ben or Geoff on the number below.

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