With the country struggling with the cost-of-living crisis, many employers who may not be able to offer pay rises can utilise the trivial benefits scheme to help hard-pressed staff.
A trivial benefit is a tax-free gift that an employer can give to their employees on various occasions, such as celebrations.
Legislation was introduced in the last few years to clarify trivial benefits and define what is exempt from tax and reporting obligations.
This clarified that trivial benefits must not increase pay and HM Revenue & Customs (HMRC) says the cost must not exceed £50 per employee (including VAT), or the average cost per employee when part of a group benefit.
Benefits could include:
HMRC says you don’t have to pay tax on a benefit for your employee if all of the following apply:
Also, if the cost of the benefit exceeds £50, the whole amount will be taxable rather than just the excess.
If any of the conditions are not satisfied, then the benefit is taxed in the normal way.
‘Close’ company directors
A close company is a limited company that’s run by five or fewer shareholders who cannot receive trivial benefits worth more than £300 in a tax year.
Need advice on trivial benefits and other staff rewards? Contact us today.
