Trivial benefits are small perks given to employees – such as gifts or after-work drinks – that are tax-free provided certain criteria are met.
Provided small gifts or perks given to company employees meet HMRC’s rules, these are tax-free benefits and don’t incur national insurance contributions for the employee. From an employer’s perspective, trivial benefits are allowable expenses for corporation tax.
Trival benefit conditions
To qualify as a trivial benefit, the perk must meet the following conditions.
- Must cost the company less than £50 per employee (this is the market value of the gift)
- Cannot be cash or a cash voucher (a voucher that can be exchanged for cash)
- Cannot be a reward for work or performance
- Cannot be in the terms of the employee’s contract.
If the above points are met, then the perk is classified as a trivial benefit and HMRC does not need to be informed.
For any benefits over £50, or those which do not meet the above criteria, tax and national insurance contributions will apply.
Trivial benefits examples:
- Giving employees a small Christmas gift
- Buying cake and flowers for an employee’s birthday
- Buying some after work drinks – providing it’s not rewarding work performance
Examples that aren’t classed as a trivial benefit
- Any reward for work-related performance
- Working lunches for employees
- Paying for a taxi when an employee works late
Directors and trivial benefits
For directors of a close company – a limited company that’s run by five or fewer shareholders – or to a member of their family or household, there is a total trivial benefits limit of £300 a year. Within this, the maximum £50 per benefit rule still applies. Anything over this £300 limit will be classed as a benefit in kind and treated accordingly – meaning tax and national insurance implications.
Lava Sky Accounting works closely with companies and directors to keep them updated and ensure they take advantage of benefits allowable to them. Get in touch today to book your free consultation.