Trivial Benefits – How to provide small Tax-Free Gifts to your Employees

When you run a business, it is important to offer rewards to your employees’ hard work, or to celebrate small and big achievements with the whole team. “Trivial Benefits” offer you a way of doing so without triggering tax liabilities and PAYE.

Since 6 April 2016 employers can provide trivial benefits such as small gifts and entertainment without having to include these within PAYE settlement agreements or disclose on P11D forms.

Previously, trivial benefits would only cover the cost of providing tea and coffee in the office, as well as small seasonal gifts, such as a turkey for Christmas. The new rules allow some more flexibility, but there are always some conditions to respect in order to benefit from these exemptions.

The conditions

The benefit must not:

• Exceed £50 (this applies to each individual gift or benefit);
• Be a cash payment (gift vouchers are allowed, providing they can’t be exchanged for cash);
• Be part of any contractual obligation;
• Pay for performances that are part of regular employment duties;

Caveat: £50 is a limit, not an allowance, if you exceed this limit the full amount of the gift will be taxable.

You do need to incur an actual cost and claim the receipted amount, so you can’t just claim the full £300 at the end of the year.

Trivial benefits for directors

If you are a director then you will still be able to receive trivial benefits, as well as providing these to family members.

The conditions above will still apply. As a director, there is an annual cap of £300, and if you provide trivial benefits to other family members who are not employees or directors, these will be included as part of your own directors allowance for the year.

Conclusions

Providing it’s not cash, the gift itself could be anything, as long as the the cost is below £50 per head.

For example: store gift cards, flowers, chocolates, wine, hampers or even taking staff out for a meal.

Keep in mind that if you still want to provide gifts and benefits that exceed the conditions for trivial benefits, you could benefit from PAYE Settlement Agreements instead.