Gifts for staff, do you know about Trivial Benefits?

December 10th, 2020     Business news

How can you give gifts to your staff without there being tax consequences? The answer may be using trivial benefits, a tax free way to give gifts to staff.

There is no tax to pay on trivial benefits in kind provided to employees where all of the following apply:

• the benefit is not cash or a cash-voucher; and
• costs £50 or less; and
• is not provided as part of a salary sacrifice or other contractual arrangement; and
• is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The tax-free exemption would apply to small non-cash benefits like a bottle of wine or a bouquet of flowers given occasionally to employees or any other benefit in kind classed as ‘trivial’ that falls within the exemption.

The rules provide an excellent opportunity to give small rewards and incentives to employees without any further tax implications. The main caveat being that the gifts are not provided as a reward for services performed or as part of the employees’ duties.

However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1 National Insurance contributions. However, trivial benefits provided as part of a salary sacrifice arrangement are not exempt.

Gift card trap

You can use non cash vouchers / gift cards like Amazon subject to the trivial benefit limit of £50. The one thing you must not do is top up gift cards as the cumulative value of the top ups could exceed the £50 limit, so a fresh gift card is required every time.

Planning note for directors

The rules also allow directors or other office-holders of close companies to benefit from these allowances, but with an annual cap of £300 in a tax year. The £50 limit remains for each gift. The £300 cap doesn’t apply to employees. If the £50 limit is exceeded for any gift, the value of the benefit will be taxable.

If you would like to find out more about Trivial Benefits and how to use them, then give Andrew Price a call on 01803 296678.