Thinking of boosting staff moral with a small gift?
Trivial benefits are a great way to reward employees without a tax bill!
A gift is classed as a trivial benefit if it costs £50 or less to provide
- it’s not a voucher that can be exchanged for cash
- it’s not performance-related or a reward for services
- it mustn’t be in the terms of the contract
If these conditions are met, you don’t need to inform HMRC – the benefit doesn’t count as earnings thus no Income Tax or National Insurance is payable.
However, if a gift is over £50 then the whole amount will be deemed taxable and will need reporting on either a P11D or you can settle the PAYE tax due via a Payment Settlement Arrangement (PSA).
For more detail on P11D’s check out our blog HERE
In theory, there’s no limit on the number of trivial benefits you can provide to an employee in a year as long as they are irregular and spontaneous thus won’t become part of a contractual agreement between the employee and employer. However, trivial benefits for Directors (and their family members) are capped at £300 per tax year.
VAT can be claimed on gifts as long as the usual evidence is obtained, being a valid VAT invoice / receipt. This will be recorded as ‘Staff Entertaining’ within the companies accounting records. Also, the cost of the trivial benefit is tax deductible.
There are plenty of occasions when you could give employees a gift that wouldn’t count as a reward for services such as a large stocking at Christmas or a lavish Easter Egg at Easter, a thoughtful birthday gift, to celebrate weddings or new arrivals.
Examples of gifts – all costing less than £50 including VAT could include a bunch of flowers on a gloomy day or a grocery store voucher to help with the cost of living. Take your team out for drinks and/or a meal to celebrate an occasion or just to say thank you!
Go on, you know you want to …
