It is well understood that benefits in kind paid to employees count as taxable income and a subject to national insurance. However, there is a much underused exception to this rule in respect of trivial benefits. Subject to certain conditions, trivial benefits (deemed to be those under £50) will be exempt from both tax and NI.
The conditions are as follows:
- The benefit is not cash or a cash voucher
- The cost is not more than £50 or an average of £50 per person.
- The benefit is not provided as part of a salary sacrifice arrangement and is not contractual.
- The benefit is not provided in recognition of work done.
Examples of when trivial benefits could be paid include birthdays, Christmas, special events personal to the employee, other faith days etc. Examples of benefits that have successfully been paid include hampers, box of fireworks, clothes vouchers, tickets, a tennis lesson, champagne etc.
It is possible for staff members to receive multiple trivial benefits in a year, although the number should be sensible.
For owner-managed businesses the total value of trivial benefits that can be paid to a director is capped at £300.
If the benefit constitutes staff entertainment (eg a birthday meal) then VAT is recoverable. If, however, it is a gift of goods VAT can be reclaimed on the first £50 (net of VAT) in a tax year.
If you would like to discuss trivial benefits in more detail please contact your usual CB Reid contact.