Change in trivial benefits is far from Trivial!
Are you considering Christmas gifts for staff? Well read on ….
Basic rules
The basic rule is that an employer can now provide trivial benefits such as a bunch of flowers, a box of chocolates, a meal out, without having to put it on the P11D and without any tax or national insurance for either employer or employee. The employer will also be entitled to claim income tax or corporation tax relief on the cost.
There are three key conditions:
The trivial benefit must cost no more than £50
The benefit must not be a reward for services or in any way contractual
The benefit must not be cash or a cash voucher (but can be a gift card that can’t be exchanged for cash).
Examples
The examples given in the HMRC draft guidance are, for the most part, sensible and very helpful.
Example A
Employer A takes a group of employees out for a meal to celebrate a number of birthdays. Five employees attend the meal at a total cost to employer A of £240. Individual employees make different menu and drink selections. Rather than undertake a detailed analysis of the bill you should accept that the cost per head is £48, reflecting an average amount of £240/5. The benefit of the meal can be covered by the exemption since the cost for each individual does not exceed the trivial benefit financial limit.
No limits
The legislation does not impose a limit on the number of trivial benefits that an employer can provide, however you must remember it cannot be a reward for services. So you can’t give gifts as a reward for reaching sales targets or high customer satisfaction feedback, however if you feel in a good mood and feel like sharing the happiness – go ahead!
Directors
For once owners of OMB’s can also enjoy the benefits, but HMRC knows what directors can be like, so the legislation imposes an annual cap of £300 on exempt trivial benefits provided to a director or office-holder of a close company (including benefits provided to members of their family or household).
Example
You could buy 6 gift cards with £50 credit on each of them. Over the tax year you could occasionally give one of these to yourself. These gift cards cannot be exchanged for cash.
How much will you save? Well you would have had to pay £126 tax and NI on £300 of extra salary (assuming in higher rate bracket) and the company would pay £41 of secondary class 1 NIC. So between you and the company there is a saving of £335.
If you would like to discuss the changes in more detail get in touch.