Trivial Benefits

Traditionally employers have always been able to rely on the “annual staff function” to exempt Christmas parties and maybe other annual events (provided the combined cost of any such functions remains below £150 per head).

But now other staff entertaining that does not qualify for annual function exemption might be given trivial benefits treatment if the cost per head is below the £50 limit. This will be good news for employers who put on more staff events than just the annual Christmas party as many of those events might become exempt from tax and NIC.

With effect from 6 April 2017, your company doesn’t have to pay tax on trivial benefits provided to its employees.  The benefit is also tax free in the hands of the employee.  A trivial benefit is one that meets all of the following conditions:

  • it cost you £50 or less to provide
  • it isn’t cash or a cash voucher that can be converted to cash
  • it isn’t a reward for their work or performance
  • it isn’t in the terms of their contract

Details are found here Trivial Benefits – HMRC Guide

The good news is that there is no maximum amount that can be provided in this situation although close company directors (companies with 5 or fewer shareholders) are limited to ONLY £300 per year of trivial benefits.

Note:

  • The benefit should not be a reward for work related matter but for a personal event such as a birthday, get well soon gift, marriage, Christmas gift etc
  • The employee doesn’t have to be entitled to the benefit otherwise its taxable as employment income e.g. it should not be a clause in their contract
  • Note that if the cost of providing the befit exceeds £50, the whole amount becomes taxable, not just the excess over £50
  • Cost is the VAT inclusive amount of providing the benefit
  • Where an employer provides a benefit to a group of employees and it is impractical to determine the precise cost per person, you should take the average cost per person to determine whether the £50 limit is exceeded.

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