Employers looking to provide staff with small gifts or seasonal tokens of appreciation should remember the rules for tax-free trivial benefits.
A benefit can qualify as a trivial benefit where all of the following conditions are met:
- the benefit costs £50 or less;
- it is not cash or a cash voucher;
- it is not provided as a reward for work or performance;
- it is not provided under the terms of the employee’s contract or as part of a salary sacrifice arrangement.
Where these conditions are satisfied, there is generally no tax or National Insurance to pay, and the benefit does not need to be reported to HMRC.
Typical examples may include a modest Christmas gift, a bottle of wine, flowers or a non-cash gift voucher costing no more than £50. So, for example a turkey that cost £45 would qualify as would a £15 bottle of wine. However, care should be taken to ensure that the gift is simply a gesture of goodwill and not linked to the employee’s performance or duties.
If a trivial benefit is provided through a salary sacrifice arrangement, the exemption will not apply, and a taxable benefit may arise. In such cases, the amount reportable on form P11D will generally be the higher of the salary given up or the cost of the benefit provided.
Directors of close companies should also remember that there is an annual cap of £300 for trivial benefits. A close company is broadly a company controlled by five or fewer shareholders.
