For a while now, employers have been able to provide their employees with small tax-free benefits known as “trivial benefits” so long as they don’t relate to the employees performance.
UK law allows for trivial benefits up to £50 each for a range of reasons, and this presents a great opportunity for employers looking to increase staff morale as well as save a little tax.
Some examples of non-performance related reasons are:
Some things to keep in mind are:
Where the employer is a close company (usually 5 or fewer director/shareholders) and the benefit is provided to a director or other office holder of the company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year. For all other employees there is no upper limit.
Because tax is never simple, here are some examples that have been provided by HMRC.
Employer A takes a group of employees out for a meal to celebrate a number of birthdays. Five employees attend the meal at a total cost to employer A of £240. Individual employees make different menu and drink selections. Rather than undertake a detailed analysis of the bill you should accept that the cost per head is £48, reflecting an average amount of £240/5. The benefit of the meal can be covered by the exemption since the cost for each individual does not exceed the trivial benefit financial limit.
Employer B provides each of its 100 employees with a turkey at Christmas and the total bill comes to £4,500. There are a variety of sizes. Because the employer has made a bulk order, the turkeys have not been priced up individually but would cost in the region of £40 to £60 each. Employees are able to choose which bird they have. Rather than undertake a detailed analysis of the individual benefits, you should accept that the cost per head is £45, reflecting an average amount of £4,500/100. The benefit can be covered by the exemption since the cost for each employee does not exceed the trivial benefit financial limit.
Employer C provides each member of its 25 strong work-force with a bottle of wine at Christmas. The total bill comes to £1,000. This reflects 20 bottles of wine that cost £15 per bottle provided to each of its employees and 5 bottles of wine provided to each of its directors that cost £140 per bottle. In this case it is not impracticable to determine the cost of the individual benefit and the actual cost per item should be applied in determining whether the monetary limit has been exceeded for each employee and director. The benefit of the £15 bottles of wine can be covered by the exemption since the cost does not exceed the trivial benefit financial limit but the benefit of the £140 bottles of wine provided to the directors cannot be covered by the exemption.
Employer D gives an employee a gift card, which costs the employer £10 to provide. The employer tops up the employee’s gift card on 7 further occasions, at a cost of £10 for each occasion. Although the benefit to the employee is topped up on separate occasions there is a single benefit of the provision of a gift card. The total cost to the employer for providing the benefit over the period of employment is £80 and therefore this benefit is not exempt as a trivial benefit.
Employer E is a wine producer and without obligation provides each of its employees with an allowance of wine from the staff shop every month. This started at the end of January 2021 and costs the employer £10 per employee each month. During the 2020/21 tax year the total cost to the employer of the benefit is £30 per employee and so the trivial benefits exemption can apply for that tax year. After a poor harvest during 2021/22, Employer E decides to stop the allowance after October. The total cost of the benefit for 2021/22 is £70 per employee. The cost condition is not satisfied so the trivial benefits exemption does not apply for 2021/22 and the benefit must be declared in the normal way for that year.
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