Originally due to be released in 2015, the Trivial Benefits Exemption has finally arrived. This is a great new way to pass on those small gestures that can help employees feel better cared for – and employees who feel cared for are generally happier.
In the past, we’ve had the option to gift small or seasonal gifts to employees and receive a tax exemption in return, but now the rules have been clarified and explained in full. While the new rules have firmer guidelines, they also appear to be beneficial to most companies, allowing for a larger benefit per head and increased tax exemption for the business.
The exemption is limited to £50 per person, which can be averaged out among a group of employees where suitable, eg: a company meal or excursion.
The benefit must not be in the form of cash or a a cash-voucher, the benefit offered must also not be written into any contract of employment or offered in return for services performed by the employee, such as overtime.
If the total benefit exceeds £50 per person or breaks any of the conditions detailed above, then the benefit is taxed in the usual way and no special exemption will be allowed.
So what is allowed?
- Vouchers – non-cash vouchers are allowed, so if you’re just not sure what a particular employee would appreciate receiving under this scheme, you can opt for a store voucher.
- Entertaining – so long as your event comes in at under £50 per person, you can pay for a company meal, event or trip to the local pub and deduct the visit from your tax bill. Just make sure the event is not in return for any work-related performance.
- Family & Household – this exemption can be extended to family and members of your employees household, so for large events where a friend or partner may be invited, you can claim back the cost of their attendance too. Do bear in mind that any additional invitees will need to be share the employees £50, rather than being able to claim £50 for any additional non-employee attendees. Perfect for the company Summer Picnic!
- Birthday Presents – the office collection for a team member’s birthday can now benefit from an additional £50 in the kitty so that the company is able to chip in on something special to celebrate.
- Flowers – a little gift for a life event outside of work, be that for illness or condolences or to celebrate an engagement, wedding or an employee becoming a parent.
- Third Party Services – if your business pays the money in to a third party supplier who supplies the benefit, this is allowed, as long as the cost is borne by the company.
What’s not allowed?
- Performance – anything related to work performance.
- Incentive – any gift to encourage performance or in lieu of overtime payment
- Cash – no cash, no bonuses and no cash-vouchers
What about contractors, freelancers and owner managed companies? Well the good news is, that you can treat yourselves too – however where the employer is a close company (five or fewer participators under control of directors who are participators) and 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) there is a maximum of £300 per tax year.– so do bear this in mind if your company falls into this category.
HMRC have laid out an extensive document detailing the rules surrounding Trivial Benefits along with worked examples, you can find that here. If you’re confused about the best way to proceed with offering this to your employees or concerned about the way this could impact your business, why not give us a call to discuss it.