Savings on trivial benefits

The trivial benefit was first introduced in April 2016. It was introduced to encourage employers to give employees benefits without incurring income tax and national insurance on the cost of this benefit.

The cost of the benefit to the employers or another organization providing the benefit on behalf of the company must be less than 50 pounds.

When an employer gives a gift or benefit to their employee, the company would have to pay Class 1a national insurance on the cost of the benefit to the employee. The employee would also then have to pay income tax on this benefit.

If this benefit meets the conditions stated below, there would be no tax or national insurance implications on the cost of the benefit.

Conditions of a trivial benefit

1.     The benefit offered to the employee must not be cash or a cash voucher.
2.      The cost of the benefit must not exceed £50 for each employee. If it’s not possible to ascertain the cost of the benefit to each employee, an average can be calculated.
3.     The benefit offered to the employee must not be provided as pursuant to relevant salary sacrifice arrangement.The employer must not have obligations to pay the employee or include this benefit in the employer benefit packages.
4.     The benefit offered to the employee must not be in recognition of particular services or employee rewards for services performed by the employee.

When to give  a trivial benefit to employees  

It’s important that these benefits or gifts are not given as a reason for employment, therefore, there must be an occasion that triggers this benefit or gift. This is to ensure that the condition stated above are met.

Example of a special occasion to give a trivial benefit to an employee

• Engagements and weddings
• New births of baby
• Wedding anniversary
• Loss of family member
• Graduation
• Staff Birthdays
• Christmas
• New year
• Faith-based celebrations

 Examples of the trivial benefit to offer employees

• Tickets to cinema
• Christmas gifts or hampers
• Football tickets.
• Champaign
• Bunch of flowers.

The limit of trivial benefits you can give in a tax year

The employer can give as many trivial benefits to the employee in a tax year as he wishes. However, care needs to be taken to ensure that the conditions stated above are met and that there is no pattern in the way the gifts are given. If care is not taken, HMRC can open an investigation as to the trend in which the benefits are given, checking if it relates to the performance of the employee.

If this is the case, the cost of the benefit would be disallowed as a trivial benefit.

In a close company, the cost of trivial benefit given to a director /Shareholder (or their relative) is capped at £300.

Taxable Employee benefits that are not trivial.

A company is allowed to give employee benefits in kind. This can vary depending on the employer’s benefits policies e.g. car benefits, health, and insurance benefit, etc.

The employer would pay national insurance on the cost of the benefits while.

For further guidance and consultation about planning a trivial gift for your team, please don’t hesitate to contact us.