Tax-free Trivial Benefits for limited companies: A guide to employee gifts and rewards

As a limited company director there might be times when you’d like to gift your employees, or even yourself as a director, without the hassle of creating a tax liability. 

One way in which you can do this is via Trivial Benefits. They’re a simple, tax-efficient way of rewarding your team or directors, but there are several strict rules you must follow for the benefit to be valid. In this blog we take a closer look at what Trivial Benefits are, how they work, and what makes them qualify for tax relief. 

• Trivial Benefits are classed as small gifts, exempt from tax and National Insurance 

• Each benefit must cost £50 or less per person, with a total of £300 per director per tax year 

• Cash, cash vouchers or any contractual benefits do not qualify as a Trivial Benefit 

• VAT recovery and Corporation Tax relief may apply 

• The correct application ensures compliance, and rewards employees efficiently 

Trivial Benefits are tax-free gifts which are not subject to National Insurance Contributions (NICs) and are gifted from UK limited companies. They can be given occasionally to directors or employees of a Close Company, if certain criteria are met.

A Close Company is: 

• A limited company with a maximum of 5 shareholders, or 

• Any number of shareholders who are also the company’s directors 

Trivial Benefits rules will only apply if your company is a Close Company. 

For a gift to qualify as a Trivial Benefit, it must: 

• Cost a maximum of £50 per person, with a total of £300 per director per tax year 

• Not be a cash voucher or cash  

• Not be an ongoing cost such as a gym membership 

• Not be contractual, so not form a part of an employee’s formal entitlements 

• Not be a reward for a professional achievement (such as replacing a bonus or performance given award) 

Once all these conditions have been met, the benefit will be exempt from tax and will therefore not need to be declared on a P11D form.

Should you gift meet all the previously mentioned criteria: 

• Your company will be able to Claim Corporation Tax relief on the expense 

• Personal tax will not be applicable for directors or employees 

• VAT can also be reclaimed (so long as your limited company is not on the Flat Rate VAT Scheme) 

Trivial Benefits are therefore a fantastic way to reward your staff without creating a tax burden, in a cost-effective way.

It’s common to see the following types of Trivial Benefits being gifted: 

• Birthday gifts (like a bottle of wine, bouquet of flowers, or box of chocolates) 

• Restaurant vouchers (non-contractual) for work anniversaries 

• Hampers given at Christmas  

• Team events like summer BBQs 

• Special occasions – such as wedding gifts or gifts given when an employee has a baby 

Remember that each benefit must cost a maximum of £50+VAT or less and be non-contractual. 

Benefits that do not qualify include: 

• Cash or cash equivalents  

• Exchangeable gift cards  

• Any item over £50  

• Regular or contractual perks (such as a weekly takeaway)  

• Childcare costs  

• Bonuses  

• Company cars  

• Health insurance, travel, or entertainment expenses  

By following these rules, you’re ensuring that your company is remaining compliant with HMRC’s regulations. 

If you’re looking for a simple, tax-efficient way to rewards your hard-working team (or even yourself!) then Trivial Benefits are a fantastic way to do this, so long as they’re used correctly. 

Got questions? Get in touch with your Aardvark Accounting Client Director who will be happy to answer your questions. Not yet an Aardvark Accounting client? No problem, get in touch today to find out how Aardvark Accounting can help you.