It is now possible for Employers to provide small benefits of up to £50 to their employees free from income tax and NIC, provided the gift qualifies under the following conditions:
- the cost of providing the benefit does not exceed £50
- the benefit is not cash or a cash voucher, however, Vouchers which can be exchanged for goods and services are not cash vouchers, and so a shop voucher could be given as a trivial benefit if it meets the other conditions set out.
- the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements),
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services).
- The exemption is an ‘all or nothing’ exemption: if the value of the benefit is £60 then the full amount of £60 is taxable, not just the £10 excess.
Each director or officer of a close company has their own £300 annual cap. However, Trivial Benefits made to members of their family or household will need to be counted within the director’s £300 annual cap, unless the member of the family or household works for the company in their own right. In such cases the family or household member will have their own £300 annual cap, even if they are not themselves a director.
If for example, a mother and father are both directors and their daughter does not work for the company but receives a £50 bunch of flowers on her birthday, this benefit will need to be equally apportioned to her parents so that £25 comes off each parent’s £300 annual cap.
HMRC has published draft guidance on this and other aspects of the Trivial Benefits legislation which can be found at https ://www.gov.uk/government/publications/income-tax-exemption-for-trivial-benefits-in-kind/income-tax-statutory-exemption-for-trivial-benefits-in-kind
Trivial benefits do not affect the £150 annual allowance which is allowable for providing events to entertain staff, please click here to read in full the article covering this topic.