A company can provide its employees small (trivial) benefits, such as a box of chocolates, theatre tickets, a meal out, a gift voucher without them incurring tax and National Insurance. On these benefits, the company would also be able to claim relief from corporation tax.
The trivial benefit must:
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- Not cost more than £50 per perk
- Not be a reward for services, or be in any way contractual
- Not be cash or a cash voucher
If the cost of providing the benefit exceeds £50, the whole cost of the benefit would be taxable, not just the excess over the £50. The trivial benefits exemption is limited to £300 per year for close companies (defined as companies with less than 5 shareholders or all shareholders are also directors).
For example a company could purchase six different £50 gift cards from preferred retailers, at different times for each employee/director and these would be covered by the trivial benefits exemption. Do not purchase six £50 vouchers from the same place at the same time, as it may be viewed by HMRC as a single benefit. You can however purchase the vouchers in a short space of time e.g. on different days over a couple of weeks.
The vouchers must not be exchangeable for cash.
The advantage of such gift cards means that you can make maximum use of the exemption, at places that sell a range of goods and purchase whenever is convenient for you.
If your spouse is also a director, they are entitled to their own trivial benefits exemption.
NOTE: This exemption is available per taxable year.
Example 1:
An employer provides its employees a Christmas gift each year valued at £50, regardless of their performance during the year. As it is a gesture of goodwill rather than a reward, the exemption applies.
Example 2
An employer takes their 10 employees out for a meal at a cost of £450. Each employee orders different things from the menu. Instead of a detailed analysis on each order, on average per head the cost is £45 so each employee’s benefit can be covered by the exemption.
If you would like to discuss the exemption in further detail please call to discuss, to prevent falling foul of HMRC’s rules.