Tax-friendly treats for your staff

14th December 2018

Did you know there’s a tax efficient way to treat your staff? If you’re thinking of buying small gifts for your team in the run up to Christmas, here’s what you need to know.

Thanks to the Trivial Benefits Exemption that came into force back in April 2016, employers have much greater freedom in rewarding staff without the worry of hefty tax implications. This policy exempts low value Benefits in Kind (BIK) from Income Tax and National Insurance Contributions.

What are the criteria for trivial benefits?

The Trivial Benefits exemption applies as long as the BIK meets the following criteria:

  • the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person)
  • the benefit is not cash or a cash voucher (although non-cash vouchers are allowed)
  • the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties

Amongst other benefits, this exemption reduces the need for extra paperwork as exempt trivial benefits need not be reported on the P11D, P9D or P11D(b).

But be careful, if the individual benefit exceeds £50 (or an average of £50 per head), the whole amount is taxable as a benefit in kind, not just the excess over £50. However, there is no limit on how many trivial benefits an individual can receive, except in the case of close companies.

Where the employer is a close company, the total cumulative value of the benefits provided to an individual employee or their family must not exceed £300 per annum.  If this ‘annual exempt amount’ is exceeded, the excess is taxable.

Of course, saving tax isn’t the main priority when looking at rewarding staff. Showing genuine appreciation at any time of year can help boost team morale and aid staff retention. Take a look at our blog post, top tips for building a great team, which outlines our approach at HB&O to building a strong, cohesive team.

For more advice on trivial benefits and other tax exemptions, including the annual events exemption, please contact our tax team on advice@hboltd.co.uk