Yes, it’s almost that time of year again. Christmas is on its way and it’s time to dust off your Christmas jumper and get the Secret Santa organised.
However, thanks to HMRC, you can spread a little more cheer this Christmas to your employees thanks to the ‘Trivial Benefits Exemption’.
Recent rules introduced by HMRC now allow companies to provide employees with trivial benefits up to the value of £50. These benefits don’t have to be reported on the P11d and no tax or National Insurance is due on them. Better still, the employer can claim income tax or corporation tax relief on the cost.
A trivial benefit could include wine, gift vouchers, flowers, chocolates, hampers or meals out.
There are of course rules, but they are pretty straight forward. The three key conditions are:
Each benefit must not exceed £50 (including VAT).
The benefit must not be cash or a cash voucher. However, gift vouchers for supermarkets and shops are allowed.
The benefit must not be a contractual obligation or a recognition reward. Benefits should be awarded perhaps because it’s Christmas, a birthday or just because the sun is shining! Basically, any non-work-related reason. If a benefit is provided because you worked late, completed a specific project or have worked hard etc, then this exemption is not allowed.
When providing a gift to a single employee, the value of the benefit will be clear. However, if a benefit is provided to a group of employees, the actual cost per person may not be. Helpfully HMRC provide the following guidance:
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 £50 per person.
It is important to note that if the cost per employee was more than £50, the employer loses the whole exception – e.g. if the cost was £55, you cannot claim the first £50.
Numerous £50 benefits can be given to each employee during the year. However, although HMRC don’t specifically state it, it would be very unlikely that they would accept a £50 trivial benefit being provided to an employee once a week etc. The essence of the rules is that the benefit is provided infrequently.
If you are a director of the company, there is a cap of £300 per year for trivial benefits that can be provided to you. For more information regarding this exemption for directors, please click here.
To read further information from HMRC about this subject, please visit: