Trivial Benefits

If you’re a limited Company director, you may want to gift your employees (or even yourself) from time to time from your business. Depending on the gift’s circumstances you might find that its cost isn’t classed as a taxable benefit.

This blog takes a closer look at Trivial Benefits to understand how they work, their intricacies, what you’re able to purchase and how it works from a taxation point of view.

What are Trivial Benefits?

In short, a Trivial Benefit is a gift that’s occasionally given to the directors or employees of a close company by an employer, which are exempt from tax and National Insurance Contributions.

What is a Close Company?

A Close Company is a UK Limited Company that has 5 or less shareholders, or any number of shareholders that are also directors.

A Trivial Benefit must:

• Be a maximum of £50 per person. If you’re the director of a limited company then you have a cap of £300 per tax year. This means that you’re only able to take a maximum of 6 x Trivial Benefits worth £50 each in one tax year
• Not be in the form of a cash voucher or voucher
• Not be an ongoing cost, such as a gym membership
• Not be provided to an employee as part of their contractual obligation, if they would have otherwise received it as a benefit as such
• Not be provided to an employee as a recognition or reward for their professional achievement

So long as the above criteria are met and adhered to, the benefits won’t be subject to tax, and therefore you won’t need to declare them on a P11D form.

Trivial Benefits tax relief

So long as the Trivial Benefit you wish to gift adheres to the above criteria, then you’ll qualify for Corporation Tax Relief on the business expense, and won’t be subject to personal tax.

The same rule applies for VAT, and therefore you’re also able to reclaim VAT on the expense, as long as it’s classed as a Trivial Benefit (so long as you’re not using the Flat Rate Scheme for VAT).

Trivial Benefits examples

The following examples are what you’d typically gift as a Trivial Benefit:

• A birthday gift for an employee, such as a box of chocolates or a bottle of wine

• A work anniversary gift, such as a restaurant voucher. Remember that the voucher cannot be a contractual perk

• A Christmas gift, such as a hamper

• A summer BBQ

• A new baby or wedding gift

So long as each benefit costs £50 or less and is non-contractual, it’s classed as a Trivial Benefit.

Examples of non-Trivial Benefits

• Cash or cash equivalents (such as a £50 note)

• Gift cards which you’re able to exchange for cash

• Any benefit that costs more than £50 (even by 1p!)

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

• Childcare costs

• Any bonuses given

• Company cars

• Health insurance, travel and entertainment expenses

Trivial Benefits – final thoughts from Aardvark

Trivial Benefits are a fantastic way to reward your team using a simple and tax-efficient method, but only if used correctly. If you have questions about Trivial Benefits or are unsure about the rules for directors and employees, your Client Director is here to help.

Get in touch today for tailored advice and information, or to discuss how we can support your employee benefits strategy.