And finally a small gift; trivial benefits

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There is not much in life that is free and even if you do not pay for it, you can be fairly certain that one way or another you will be taxed on it.

However, there is no tax in relation to payments by an employer to benefit an employee if the benefit cost £50 or less and it is not:

  • Cash or a cash voucher (although gift vouchers for a shop are allowed);
  • A reward for work or performance by the employee; and,
  • In the terms of their contract.

Such payments are known as ‘trivial benefits’. Provided all of the above conditions apply, there is no need to pay tax or NIC or even to let HMRC know about them. Where the payment is in excess of £50, the exemption does not apply, it is not a tax free allowance that can be deducted from a higher sum. Where it is not clear who has received how much benefit, for example, where employees are all taken out for a meal to celebrate a birthday, the average across the group is the relevant figure to use is assessing whether the exemption applies.

In addition, where payments are made to a shareholder/director, special rules apply to limit the overall amount of payments in the year to a maximum of £300.

The exemption can be used to cover such things as buying flowers for the birth of a new baby or perhaps more relevant for this time of year, a small seasonal gift like an Easter egg, but the key is that the gift is related to welfare and goodwill, not employment service or performance. Combined with the £150 annual staff function exemption this should help to reduce employer costs as more payments fall outside the tax and NIC net.

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