There will be occasions when you may wish to provide small gifts to employees, throw a staff function or even treat yourself as the director.
In this guide, Louisa Drewett from Aardvark Accounting explains what can be claimed and how much, whilst making the most of the exemptions available for trivial benefits.
What are the changes?
Since 6 April 2016 the rules have changed, meaning that employers can now 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 cover the provision of tea and coffee whilst at work and small seasonal gifts, such as a turkey for Christmas.
The new rules allow some more flexibility however there are some small changes you need to be aware of, to make sure you don’t get stung!
The following conditions must be adhered to in order to be able to provide tax-free trivial benefits.
The benefit must not:
- Exceed £50 (this applies to each time you provide a trivial 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 services that are performed as part of regular employment duties
Be careful – not to spend one penny more than £50, otherwise the full value of the benefit will be taxable. This is also not a round sum allowance.
You do actually need to incur a 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. Please bear in mind of the above conditions, as these will all still apply. As a director, there is an annual cap of £300. If you do provide trivial benefits to other family members who are not employees or directors, these will be included as part of your directors allowance for the year.
Examples of what you can do to treat yourself and your employees
Providing it’s not cash, the gift itself could be anything, providing the cost is below £50 per head.
For example; store gift cards, flowers, chocolates, wine, hampers or even taking staff out for a meal.
These trivial benefits are in addition to the annual staff entertaining allowance of up to £150 per annum, per attendee and therefore will help increase morale, whilst reducing your corporation tax liability. So what are you waiting for? The weekend is coming up so go and treat yourself.
Read the official guidance to trivial benefits here.
Protect your contract income - pay via your limited company
Tax-efficient life cover - your company pays the premiums - save up to 50%
Need a contractor accountant? - compare 30+ specialist firms