Trivial Benefits – Tax exemption for rewarding your employees

Back in April 2016, HMRC introduced a tax exemption for “trivial” benefits provided to employees. This exemption removes gifts to employees where the total value is £50 or less from reporting and any tax or National Insurance charge.

In addition to the gift being £50 or less, in order for it to fall within the trivial benefit legislation and be exempt from charge to tax and NI, it must also meet the following criteria:

• It is not cash or a cash voucher
• It is not a reward for recognition of their work or performance
• It is not within the terms of their contract

Furthermore, any director of a close company or a member of their family/household cannot receive more than £300 in trivial benefits in any one tax year.

Before this guidance was brought into play, these benefits were required to be reported on either a P11D or on a Pay as Your Earn Settlement Agreement (PSA) following the end of the tax year. By removing this obligation, this has seen simplification for companies in the reporting required surrounding employee benefits where the value is minimal.

Although the end of year reporting has been removed, employers should continue to keep a record of all benefits provided to employees, whether trivial or not. This is because if HMRC were to carry out an employer compliance review then they could request line of sight to the finer detail of benefits provided to ensure the tax and National Insurance treatment applied at the time was correct.

It is also important to remember that any benefits provided to employees which do not fall under the trivial exemption must continue to be reported to HMRC on either a P11D or PSA.

If you have any questions on the rules surrounding employee benefits or would like any further information please get in touch.