Trivial benefits – Don’t lose this small tax-free allowable expense
Is there a limit on trivial benefits each year?
The trivial benefit is a small tax saving option available to an employer. The employer can buy a gift voucher for their employees or company can pay its directors without paying tax. Trivial benefits will be exempted from tax and NI or tax-free.
Some important points about trivial benefits:
- Cost of providing benefit to an employee should not be over £50 including VAT.
- The benefit is not awarded in reward to employee service.
- The benefit is not awarded as part of an employee’s contract of employment (including salary sacrifice arrangements).
- If it is a retail store voucher, it cannot be convertible into cash.
In case of not fulfilling any of the above rules, the benefit is taxed through P11D or payroll. If you exceed amount over £50 on trivial benefit, then the whole benefit would be considered as taxable not only the excess over £50.
Trivial benefits for directors of the close company:
If you are a limited or close company (that is run by 5 or fewer shareholders or directors) and provide trivial benefits to directors, trivial benefits £300 for directors should not exceed in a tax year. For example, if the employer provides the trivial with five bottles of wine costing £140 per bottle to each of shareholders or directors, then the total cost for employer is £700/5 that would be taxable not only the excess over £50 on trivial benefit for directors HMRC in a tax year as it exceeds the limit of trivial benefit that should be £300 in tax year. On the other hand, if an employer provides the trivial with five bottles of wine costing £15 per bottle to five directors, then the total cost for an employer is £75/5 that will not exceed the limit of trivial benefit for directors.
Examples of trivial benefits that are allowed:
- You can provide trivial benefits to a group of employees by taking them out for a meal to celebrate a birthday.
- You can buy Christmas present as trivial benefits such as wine, chocolate, flowers, hampers for each employee.
- Some other examples of trivial benefits are a box of fireworks for an employee, fat face vouchers, tickets to theatre, a tennis lesson, wedding anniversary champagne or birthday present.
- You can give a summer party to employees.
For example, if an employer takes a group of employees of five members for a meal to celebrate a birthday costing £48 per head, then the total cost for the employer is £240/5 that will not exceed the limit of trivial benefit for each employee.
In another example, trivial benefits will be non-taxable if the employer gives each of his/her employees a bottle of wine costing £25 for each bottle as Christmas present or £25 worth non-cash shop gift voucher as an alternative to wine to those who don’t drink wine.
How many trivial benefits in a year?
There is no limit on a number of trivial benefits provided by the employer to employees or directors, but it should not be exceeding to £50 for each employee in a year and £300 for a director in a tax year.
How can I find tax advisors near me for tax advice on trivial benefits?
If you are looking for tax advice regarding trivial benefits or looking to make sure if you have to claim all allowable expenses to keep your tax payable less, please feel free to get in touch with our team of professional personal tax accountants near you or to get personal tax advice according to your business needs.
*close company – A company that is run by 5 or fewer or fewer shareholders.