Trivial Benefits – A Guide for Employers
‘Trivial benefits’ might sound like the name of some dodgy daytime quiz show. But as much as affairs relating to tax normally send me to sleep (thank goodness for Accountants), understanding trivial benefits is really useful for employers who treat their staff to gifts. So here’s our guide for employers (in plain English with no jargon, promise).
What is a Trivial Benefit?
A trivial benefit is, in short, a benefit you give to your employees on which they do not have to pay tax or National Insurance – a benefit you don’t have to declare on a P11D form.
So essentially these are small gifts and so forth.
It’s important that employers of all sizes understand trivial benefits and how they work in order to ensure when giving gifts to employees that they don’t land said employees with an unexpected tax bill.
What Counts as a Trivial Benefit?
In order to qualify as a trivial benefit, the benefit has to meet some very specific criteria:
- It costs you, as the employer, no more than £50
- It cannot be cash and it cannot be a cash voucher
- It cannot be something that is agreed in the terms of their contract (i.e. you cannot agree to give x amount of gifts as a part of the contract and have these count as trivial). In the case of a benefit that’s a contractual obligation on your part, it is fully taxable.
- It must not be performance related. So, for example, you can’t give someone a £50 gift because they hit the most deadlines or because they were first to sales target and have that be classed as trivial. If a benefit is related to work performance, it isn’t trivial
So essentially this has to be a gift/small benefit you give for a non performance related reason and each individual trivial benefit must be no more than £50 in value. As such, Christmas gifts and so forth often count as Trivial Benefits.
How Many Times Per Year Can You Give Trivial Benefits?
There’s not a specific limit on the number of times you can award such benefits. However, when we’re talking about a “close company,” (which is a company with fewer than 5 shareholders) there is a maximum annual value of £300 per director or office holder.
Now, don’t forget that there’s an individual value limit of £50 – that applies all the time. The £300 is a maximum value over a year. So you could, for example, give yourself as a Director and employee 6 £50 gifts over the course of the year. But if you give yourself anything over and above that, it will be taxable.
Non-directors in close companies who do not hold an officer role are exempt from that overall annual limit (but the £50 individual limit applies).
What Happens if a Gift Exceeds the £50 Value?
If a benefit exceeds the £50 limit, then the whole benefit becomes taxable (not just the value over £50). So even if the value is £51, the benefit will have to be declared on a P11D and the employee will owe tax on the value of it.
Does the £50 Limit Include VAT?
Yes. VAT is included for the purpose of calculating the value of a Trivial Benefit. So if a gift you give to an employee is £45 excluding VAT and VAT is 20%, then the full value is £54 and the whole amount is taxable.
Can Trivial Benefits be Alcohol?
Yes. A bottle of wine or spirits, for example, would be absolutely fine as a trivial benefit gift providing the total cost to you is no higher than the £50. The only things it cannot be is a cash gift or a cash voucher.
Can Gift Vouchers be Trivial Benefits?
Yes, providing they’re not vouchers that can be exchanged for cash. So an Amazon voucher or a High Street voucher would be absolutely fine providing the total value doesn’t exceed the £50 limit.
Are Trivial Benefits Tax Deductible for a Limited Company?
Yes. Providing these benefits meet all the criterial to qualify as trivial and you have the proof of purchase, they’re deductible against your Corporation Tax bill.
Other Sources of Information
I’m not an accountant and, as ever, you should seek the advice of a qualified accountant on any matters relating to tax. But further reading on Trivial Benefits is available here: