Understand HMRC trivial benefits, the tax break that exists to let employers give their staff tax-free benefits as well as the examples of gifts that help an employer stay within the rules of trivial benefits and how Company Directors can claim for them.
Friendly Disclaimer: Whilst I am an accountant, I’m not your accountant. The information in this article is legally correct but it is for guidance and information purposes only. Everyone’s situation is different and unique so you’ll need to use your own best judgement when applying the advice that I give to your situation. If you are unsure or have a question be sure to contact a qualified professional because mistakes can result in penalties.
1. What are HMRC Trivial Benefits?
Trivial benefits are small amounts of money an employer can spend on gifts for their employees without needing to notify HMRC about them or becoming a taxable benefit in kind.
2. What Counts as a Trivial Benefit?
A trivial benefit must meet all of the following criteria to meet the rules of being tax-free:
- it costs £50 or less to provide
- it’s not cash or a cash voucher
- it isn’t a reward for their work or performance
- it’s not included in the terms of their contract
If the gift provided doesn’t meet these terms, it will be classed as a taxable benefit in kind and need to be declared on a P11d form.
3. Examples of Trivial Benefits
- Restaurant voucher (that cannot be exchanged for cash);
- Gift voucher (that cannot be exchanged for cash);
- An experience;
- A meal;
- Food hamper.
4. Company Directors and Trivial Benefits
Directors of a close company cannot receive trivial benefits worth more than £300 in a single tax year. A close company is defined by HMRC as a Limited Company that has 5 or fewer participators** or where all the participators are also directors.
** For most small limited companies, participator means shareholder. But it can also apply if a Company has certain types of borrowing or creditors like debentures.
5. Salary Sacrifice Arrangements and Trivial Benefits
Any amounts provided as part of a salary sacrifice arrangement are not exempt under trivial benefits. These types of payments need to be reported on a P11d Form using the value which is the higher of:
- the salary given up
- how much paid for the trivial benefits