How to best use of tax-free trivial benefits

The tax free trivial benefits exemption applies to small non-cash benefits, for example a bottle of wine or a bouquet of flowers, given occasionally to employees.

Although the benefit is defined as ‘trivial’, employers should remember that this can be an efficient way to provide small rewards and incentives to employees. As per HMRC guideline the main requirement is that the gifts are not provided as a reward for services performed or as part of the employees’ duties.

However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions.

There is no requirement to let HMRC know once the benefit meets the necessary criteria.

The tax exemption applies to trivial BiKs where the BiK:

• is not cash or a cash-voucher; and
• costs £50 or less; and
• is not provided as part of a salary sacrifice or other contractual arrangement; and
• is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules also allow directors or other office-holders of close companies and their families to benefit from an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year.

The £300 cap doesn’t apply to other employees. If the £50 limit is exceeded for any gift, the total value of the benefit will be taxable.

If you are looking to know about tax free benefits, feel free to contact us.