As many businesses will not be hosting Christmas Parties this year for their teams, we thought we’d explain a bit more about the Trivial Benefit system and how you can use it to make sure your staff feel valued this Christmas period.
What is a trivial benefit?
HMRC have some strict rules when it comes to what they define as trivial. You don’t have to pay tax on a gift (or in official terms, a benefit) for your employee if all of the following conditions are met:
- It cost you £50 (including VAT) or less to provide
- It isn’t cash or a cash exchangeable voucher
- It isn’t a reward for their work or performance
- It isn’t in the terms of their contract
If all criteria is met, the benefit is known as a trivial benefit. There is no need to inform HMRC, and the trivial benefit won’t count towards taxable income or Class 1 National Insurance contributions. Trivial benefits don’t need to be reported on your annual P11D forms.
Allowable trivial benefits include:
- Taking a group of employees out for a meal to celebrate a birthday
- Buying each employee a Christmas present
- Flowers on the birth of a new baby
To avoid the benefit being taxable the benefit must not exceed £50.
There are specific rules around events like Summer and Christmas parties for employees, this includes limited company directors, but not sole traders. For these annual events, you may be able to claim up to £150 per employee, and possibly even claim for a plus one for each employee.
Is there a limit on trivial benefits each year?
In most instances, an employee can receive multiple trivial benefits throughout the year, as long as each one does not exceed £50.
Where the employer is a close company, the exemption is capped at a total cost of £300 in the tax year where the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household). This £300 limit is separate to the exemption for annual parties mentioned earlier.