What are trivial benefits? An explanation of the staff benefits you can give without incurring tax. From April 2016, legislation was introduced providing clarity as to what small benefits are deemed to be trivial and therefore exempt from tax and reporting obligations.
Conditions to be satisfied
- the cost of providing the benefit cannot exceed
£50 per employee (including VAT), or the average cost per employee if provided to a group of employees and it is impracticable to work out the exact cost;
- the benefit is not cash or a cash voucher (but gift cards would qualify as long as they are not exchangeable for cash);
- 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 (or in anticipation of such services) or as part of their normal employment duties.
If any of these conditions are not satisfied then the benefit is taxed in the normal way – via a P11D, PSA or taxed through the payroll. Also, if the cost of the benefit exceeds £50, the whole amount will be taxable rather than just the excess.
In most instances, an employee can receive multiple trivial benefits throughout the year, as long as each one does not exceed £50. However, where the employer is a close company, the exemption is capped at a total cost of £300 in the tax year where the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household).
Examples of trivial benefits
Per HMRC’s guidance, some types of examples of trivial benefits are:
- taking a group of employees out for a meal to celebrate a birthday;
- buying each employee a Christmas present or birthday present;
- flowers on the birth of a new baby;
- a summer garden party for employees.
The aforementioned is on the basis that the benefit per employee does not exceed £50.
Certain other benefits you provide to your employees are not taxable. This can be a good way to incentivise staff, as well as being tax efficient from an employer’s perspective.
Some of the most common examples are:-
- Payments for business mileage in an employee’s own car, provided they are within HMRC approved rates (45p per mile for the first 10,000 miles and 25p per mile thereafter). Any excess above these amounts will be taxable
- Employer payments into a registered pension scheme
- Medical treatment to help an employee return to work after an absence (or expected absence) of at least 28 days, up to a maximum cost of £500
- One health screening assessment and one medical check-up per year, but any follow up treatment is taxable
- Meals provided in a staff canteen and light refreshments at work
- Parking provided at or near an employee’s place of work
- Workplace nursery places for the children of employees and childcare vouchers (if entered in the voucher scheme prior to October 2018). For new parents, information on applying for tax-free childcare can be found at gov.uk/get-tax-free-childcare
- Removal and relocation expenses up to a maximum of £8,000 per move
- One mobile phone per employee, registered in the employer name
- Annual social functions for employees provided that, in any one tax year, the total cost does not exceed £150 per head (including VAT)
- Use of a pool car – this is a vehicle made available for use by more than one employee, with very limited private use, which is not normally kept overnight near the residence of any of the employees
- Expenses that are paid or reimbursed by employers, so long as they were incurred entirely for business purposes. This includes office equipment bought by an employee for home working however this must be discussed in advance. Any significant private use element should be subject to tax and NIC via the payroll.
- Additional household expenses incurred whilst your employee is working from home (e.g. electricity, heating or broadband) can be paid at a flat rate of £6 per week from 6 April 2020.
If you provide trivial benefits and require assistance or tax advice, please contact one of our team on +44(0)330 024 3200 and they will be happy to assist you.