Employees and Office holders can be provided with trivial benefits. These are not subject to Income Tax or National Insurance on the employee, whilst the employer can also obtain tax relief and reclaim (if registered) any VAT on the items purchased. In order for an expense to be able to be classed as a trivial benefit it must meet the following conditions:
- the total cost (incl. VAT and tips) provided is £50 or less;
- it is not a cash or a cash voucher (i.e. a voucher that can be exchanged for cash);
- it is not a reward for the performance of work nor in recognition of services performed by the employee as part of their employment duties (or in anticipation of such services);
- it is not included in the terms of their contract as an entitlement.
There is an additional £300 (incl. VAT) cap per person per tax year for officers of a company and their family or household members. Members of the office holder’s family or household who are employees of the same close company are each subject to their own annual cap of £300. This is known as an annual exempt amount.
If either, the individual limits or the annual exempt amount is breached; tax and national insurance will fall due on these payments.
Trivial Benefits – Practical Examples
Some examples of trivial benefits (non-exhaustive list) are:
- taking a group of employees out for a meal to celebrate a birthday;
- providing a £50 voucher (not exchangeable for cash);
- buying each employee a Christmas or birthday present e.g. wine, chocolates;
- flowers on the birth of a new baby;
- a party for employees, which may fall outside of an annual party £150 exemption.
Trivial Benefits – HMRC Guidance
The trivial benefits draft HMRC guidance, which has been since been enacted, can be found here, which includes various examples. The current manuals can be found here although it requires more navigation.