In April 2016 a set of new rules emerged which stated that, employers could now provide ‘trivial benefits’ to employees and not have to worry about declaring these to HMRC. To gain a better understanding of this, we must ask ourselves what exactly trivial benefits are and is there a limit to how much they can cost before being considered a taxable benefit.

The updated rules

The rules on trivial benefits are as follows:

• The value of the benefit should not exceed £50
• The benefit cannot be a cash payment, gift vouchers are allowed if they can’t be turned into cash.
• The benefit must not be included in the employee’s contract.
• The benefit is not in lieu of payment or a reward for work done (see below) or part of a salary sacrifice agreed with the employee.

It is important to not go over the £50 limit given; if this is to happen, even by pennies, the whole sum becomes taxable. It is also worth noting you can’t claim for trivial benefits as an annual allowance, but you must have receipts for the cost of each trivial benefit before you can claim income tax or corporation tax relief.

You would not provide a trivial benefit as a reward for a piece of work. This means you should not give an employee a £50 bottle of wine as payment for a well-done job or the benefit will be taxable under the rewards for services rule. Instead, the wine must be a token of appreciation or a perk, along the same lines as treating staff to a meal.

Examples of trivial benefits

• Flowers for the birth of a new child
• A hamper for someone passing an exam
• A Christmas gift or Birthday gift
• Providing a £50 voucher (not exchangeable for cash)
• Taking the team out for a meal for an employee’s birthday

How many can you do annually?

Assuming you have followed the rules above strictly, there is no limit on how many trivial benefits you can give to employees.  For directors it is slightly different, they can only use up to £300 in a year, this could equate to six gifts of £50.

What should I do if I exceed the limit?

If you have given gifts that cannot be counted as trivial benefits, you must consider the following:

• Whether it should be reported as part of the employees pay, this must be under normal payroll rules.
• Whether it should be reported as part of the P11D form and pay Class 1A National Insurance on the value of the benefit
• Lastly, you could pay the tax, on the behalf of the employees under a PAYE SETTLEMENT AGREEMENT.

Why should I give out trivial benefits?

Trivial benefits are a great tool for boosting morale in the workplace, it is also worth nothing they won’t cost an arm and a leg, and debatably most importantly they can be claimed as corporation tax relief. These benefits are living proof that a little can go a long way.

Do trivial benefits need reporting?

If they comply with all the rules, they do not need reporting. The best thing about trivial benefits is that they were set up by HMRC with their aims of making life easier for employers.

How do party expenses work?

Despite their reputation, HMRC still get in the spirit of things around Christmas. This is because they allow limited companies (sadly not sole traders) to put on a festive party with the ability to claim it against tax. But naturally, there are some rules to abide by. The first thing to say is that this is an exemption and not an allowance – the distinction is important.

There are three key rules you need to abide by to receive this, they are the following:

• The event must be open and accessible to the whole workforce.
• It must be an annual event such as, Christmas or Halloween.
• Most importantly, the cost must not exceed £150 per head.

If you comply with these rules, then you should be able to carry out your event and receive the ability to claim it against tax.

If you’re looking for some help with your accounts, feel free to get in touch with us here at AWOC Accounting, and we’ll be able help.