As an employer, you may wish to provide your employees with benefits beyond their salary. Usually these benefits need to be reported to HM Revenue & Customs (HMRC), and tax and National Insurance may be payable by you and/or your employee.
From 6 April 2016, where trivial benefits are provided to employees, they may be exempt from tax and National Insurance, if certain conditions are met. The conditions are:
- the cost of providing the benefit does not exceed £50 per employee per year
- the benefit is not cash or a cash voucher (non-cash vouchers, such as a high street gift voucher, are allowable under the exemption)
- the employee is not entitled to the voucher as part of a contractual arrangement (including salary sacrifice)
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
- where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year
If any of these conditions are not met then the whole of the benefit will be taxed in the normal way and subject to any exemptions or allowable deductions in place.
One of the main conditions is that the cost of the benefit is less than £50 per employee. If the cost is above £50 the full amount is taxable, not just the excess over £50. Where the individual cost for each employee cannot be established, an average could be used.Gift examples
Detailed in HMRC's guidance are several examples, which are considered to be exempt if the conditions are met. These include:
- providing an employee with a Christmas present, such as a bottle of wine or a high street gift voucher
- taking a group of employees out for a meal to celebrate a birthday
- a bunch of flowers on the birth of a child or a bereavement
- a summer garden party for employees (not covered by the annual parties and functions exemption of £150 per employee)
Based on HMRC guidance, some examples of what is not allowed under the trivial gift exemption include:
- providing a working lunch for employees (because this is related to their employment)
- gifts, incentives or events related to performance targets or results
- gifts, incentives or events in relation to employment services (e.g. long service awards or team-building events)
- taxis when employees work late, where the late night taxi exemption does not apply
In summary, a non-cash gift is usually accepted as trivial, if it is under the value of £50 and is related to employee welfare and goodwill, not as recognition of a particular service or performance.
If you are unsure, please do contact us
before assuming the trivial benefit, you are about to provide, is covered by the exemption.