T: 0131 341 4250|E: andrew@salonfrog.com
T: 0131 341 4250|E: andrew@salonfrog.com
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.
This is what they say:
For a gift to be considered a trivial benefit, the following 4 conditions must all apply:
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.
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:
Example A
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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This short article takes you through the main rules but remember: it doesn’t have to be a Christmas party. Salons are very busy in December, so you could have a January party instead to say thanks to your staff.
This is what they say:
To be allowable, the party must be all the following:
Remain below the £150 limit and there is no additional tax or national insurance to pay; and the whole expense is allowable against your corporation tax for the year.
So let’s take a look at each of these requirements:
The £150 limit includes: The cost of the function (including VAT), the cost of transport (e.g. taxi) and overnight accommodation, if either of these are provided.
Divide this total cost by the number of people (including non-employees) who attend to give you the cost per head.
HMRC say that “annual” is something that happens once a year on a recurring basis (such as a Christmas party or summer barbeque). So it follows from this that a one-off event, for example a party to celebrate your salon being open 2 years , cannot be an annual party or function. So in this case, the expense would not be allowed.
Holding a Christmas party can be a great way to show appreciation for your team and if you keep within the HMRC criteria, there’s a lot less tax to pay.
As an alternative to the staff party, there is also something called ‘Trivial Benefits’ if you want to spend £50 or less on each employee. See here: Trivial Benefits | a tax efficient way to thank your staff – and you!
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Unless you want to get arrested (or you’re in a naturist resort) everyone needs to wear something in the salon. But can you get the tax back on what you wear for work? And if so, how?
The rest of this article tells you more.
This is what they say:
For an expense to be allowable for tax, it has to be incurred “wholly and exclusively” in the salon’s business.
HMRC go on to say that: in the same way everyone has to “eat to live”, so similarly everyone needs to wear something for “warmth and decency” (whether they are at work or not).
In other words, you’re going to cover yourself up whether you go to work or not, so the cost of the clothes you wear to work cannot pass the “wholly and exclusively” test.
And to HMRC, it does not matter whether you’ve bought your clothes only for work (and would never dream of wearing them to the champagne bar), what counts is whether you could.
Having said that, HMRC do allow 3 specific types of clothing:
So if your staff are required to wear a ‘uniform’ then you can most likely get the tax back, but read on…
By Logo’d, we’re talking about clothing that has a salon logo on it.
HMRC are a quite vague in this area but do say that: “fixing a permanent and conspicuous badge to what would otherwise be ordinary clothing may be enough to make it a uniform, but each case must be considered on its merits.” In particular HMRC will check that:
The essential test is whether your employee would readily be recognised as wearing a uniform by a person in the street. A detachable badge for example is not sufficient for this.
So if you do get your staff to wear t-shirts or fleeces in the salon, the safest option is to get them permanently and conspicuously logo’d.
If your clothing is allowable, so then is the cost of washing and ironing it!
If the Salon provides the allowable clothing for its staff, then the cost (of the clothes and washing them) is recorded in its accounts and reduces the amount of profit that it pays corporation tax on.
If the employees are required to pay for their own allowable clothes, they can include this cost in their self assessment return each year, or contact HMRC to have their PAYE tax code amended to reduce the tax they pay each month.
Additionally, if the employee is required to wash their uniform, they are able to reclaim a standard flat rate allowance of £60 per year in the same way!
‘Ordinary’ clothing is not allowed as a business expense and so you cannot claim the tax back. However, certain ‘business’ clothing (for example uniforms, protective clothing and logo’d t-shirts) may well be allowable, as is the cost of washing them.
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