Trivial benefits can be a great way of motivating employees and making them feel valued in the workplace. Before you consider how trivial benefits could be useful for your business, it is important to understand the definitions and rules behind them.
What Classes as a Trivial Benefit?
A trivial benefit is a small gift given to an employee from management. It is usually small because it holds no real value, such as a birthday present, flowers, or tea and coffee in the workplace. For this reason, you do not have to pay tax on these benefits.
A trivial benefit:
- costs you £50 or less to provide.
- isn’t cash or a cash voucher.
- isn’t a reward for work or performance.
- isn’t in the terms of an employee’s contract.
What Does Not Class as a Trivial Benefit?
It’s important not to confuse trivial benefits with ‘benefits in kind’. The latter includes things like gym memberships and company cars…
- Rewards given for good work.
- Benefits as part of a salary sacrifice scheme.
- Benefits worth more than £300 per tax year for directors of ‘close’ companies.
- Benefits for a group of staff may differ, as you are eligible to claim up to £150 per employee for annual events. These exemptions are separate to the trivial benefits rules however!
What Are Some Examples of Trivial Benefits?
- Bottle of wine (or 2!)
- Box of chocolates.
- A meal out under £50 per head.
- Gift cards.
What Tax Applies to Trivial Benefits?
According to HMRC, a trivial benefit must meet certain criteria. For example, it should cost you £50 or less and shouldn’t be given in the form of cash. If the cost of providing the benefit exceeds £50, the full amount is taxable, not just the excess over £50. In situations where the individual cost cannot be estimated accurately due to being a group event, calculating the average cost per employee is acceptable.
With the relevant information you can claim back VAT on trivial benefits. It may not seem worth claiming on items worth less than £50 but over time these benefits will add up.
Can I Claim Trivial Benefits as a ‘Close’ Company Director?
A ‘close’ company is a limited company that’s run by five or fewer shareholders who are all directors. Trivial benefits can only be claimed for ‘close’ companies if they come to under £300 per tax year.
This £300 yearly limit is separate to the exemption for annual events, such as Christmas parties or summer BBQs. For such events, you may be able to claim up to £150 per employee, however this would be separate to a trivial benefit!
How Should You Report Trivial Benefits?
If the gift or benefit you provide an employee doesn’t meet the trivial benefits criteria, you need to declare it to HMRC and pay any tax or NI you owe. To do this, you’ll usually need to submit P11D form to HMRC for every employee who received expenses or benefits.
You don’t need to submit a P11D form for an employee if you’re paying tax on all their benefits through your payroll.
It is important to know the trivial benefits that may be available to your company, and the rules involved with these. Trivial benefits should be given as one-offs and acts of kindness, to improve employee wellbeing in the workplace and make people feel valued.
If you have any questions relating to trivial benefits, please get in touch with us info@future-cloud.co.uk.
