Trivial Benefits | a tax efficient way to thank your staff – and you!
What is a trivial benefit and why’s it so good?
A ‘trivial benefit is something you give to an employee, such as a bottle of bubbly, flowers, or a non-cash gift voucher.
If the gift falls within HMRC criteria there is no tax or national insurance to pay for either you (as employer) or the employee receiving it. And what’s more, the cost will also be allowable against corporation tax. And as a Director, you are also eligible!
For example, you could give 6 of your staff a £50 non-cash gift voucher each, costing you £300. But as long as the gift falls within HMRC criteria, you would get £57 back as a reduction in your corporation tax and there will be no national insurance to pay.
The rest of this article tells you more.
What’s HMRC‘s stance on all this?
This is what they say:
For a gift to be considered a trivial benefit, the following 4 conditions must all apply:
- it cost you £50 or less to provide (per employee)
- it isn’t cash or a cash voucher
- it isn’t a reward for their work or performance
- it isn’t in the terms of their contract
What’s a cash voucher?
One where you can exchange the voucher for cash. So in the UK, they’re rare so you’d be ok with most vouchers, for example one from M&S.
What’s a reward for their work or service?
Giving an employee a gift for ‘good performance’ or to celebrate the Salon having its busiest month are both rewards for work or service, so HMRC would see this as a salary or bonus. So be careful what you say the gift is for. It’s perfectly fine to give a gift to celebrate a birthday or (silly as it sounds) just the fact that it’s sunny! As long as it’s not connected to how well the employee is doing work-wise.
HMRC give a number of examples in their guidance; the basic one being:
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.
Remember, as a Director you are also an employee and so can also be given a trivial benefit. The rules are just the same however there is a total limit each year for Directors which you need to watch, which is £300 in each tax year. So this could be 6 x £50, or 12 x£25. As long as each is £50 or less, and the total of them in the year is £300 or less.
Trivial benefits can be a good tax-efficient way to give something extra to your staff at any time of the year. Some salons are now giving these to staff instead of the xmas party (or in some cases as well as). Just make sure you stay within the HMRC criteria!
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