Random Acts of Kindness (HMRC Style)

HMRC Trivial Benefits

Really? Free money? 

Not quite – but nearly!   In the form of ‘Trivial Benefits’ from HMRC.

So what exactly is a Trivial Benefit?

Far from being ‘Trivial’ – a better description is a small ‘token gift’ given by the management of a company to their employees.  Not a ‘perk of the job’, but something unexpected. A goodwill gesture which leaves an employee and an employer with that feel good factor.  Moreover, these trivial benefits can be given to an individual or to a group of employees.

Trivial – To Be or Not To Be?  – That is the question…

To be considered a ‘trivial benefit’, all of the following criteria must apply:

• It must cost you £50 (including VAT) or less to provide
• It’s not cash or a cash voucher (shop gift vouchers allowed)
• It isn’t a reward for an employee’s work or their performance
• It isn’t in the terms of their contract

Types of benefits allowed include:

• Ice creams for everyone on a really hot day
• Pizza for the whole team after a hard week
• Flowers sent for the birth of a baby
• A summer party for employees
• Seasonal flu jabs

Types 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 results or performance targets
• Gifts, incentives or events in relation to employment services, e.g. team-building events
• Taxis when employees work late

Other considerations:

• Calculating cost:

Where a benefit is provided to a group of employees and it is impracticable to work out the cost to each individual, the benefit will be regarded as trivial. This is if the average cost does not exceed £50 (Inc. VAT) – providing the other conditions are also met. In addition, if the average cost exceeds this figure, then the whole amount is taxable not just the excess over £50.

• Limits

There is no limit to the number of trivial benefits that an employee can receive each year. Except where the individual is a director or other office holder in a ‘close’ company.

A close company is a limited company that’s run by 5 or fewer shareholders.  In addition, the total amount of tax-free benefits that can be provided to directors and office holders and their families is capped at £300 per tax year.

• Tax advantages

As an employer, you may be able to claim tax relief and VAT back on the trivial benefits provided.

How do you report a ‘trivial benefit’?

Simple answer – if it complies with the criteria, you don’t need to!  And, even better, you don’t need to pay tax or National Insurance either!*

*Trivial benefits provided as part of a salary sacrifice arrangement, are not exempt and will need to be reported via form P11D.

In addition, you will need to declare and pay tax and National Insurance on any benefit which doesn’t meet the criteria.

To conclude

Unsure whether a benefit counts as a trivial benefit, or you would like some help with your finances, do get in touch. We’re delighted to hear from you.

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Categorised in: Employing Staff

This post was written by Daisy Vowles