What are business trivial benefits?
Employers don’t need to report or pay tax and NI on trivial benefits. AXA explains more and provides trivial benefits examples.
What are business trivial benefits?
Employers don’t need to report or pay tax and NI on trivial benefits. AXA explains more and provides trivial benefits examples.
What are trivial benefits? A guide for small business owners
Offering a range of company benefits shows your employees how much you value and appreciate the work they do.
Many businesses go above and beyond for their employees, offering things like mobile phones and laptops, private healthcare and company cars on top of their regular salary. However, these added extras, known as benefits in kind, need to be tracked so you can declare them to HMRC and pay the right tax and National Insurance. As the old saying goes, ‘there’s no such thing as a free lunch’… or is there?
You can reward members of staff with smaller gifts and perks, also known as ‘trivial benefits’, and you won’t need to report them to HMRC or pay tax and National Insurance. Of course, the idea of a ‘small gift’ can be interpreted differently which is why HMRC introduced guidance in 2016 to provide clarity on what benefits can be deemed trivial and therefore exempt from reporting obligations.
Here, AXA explains more about trivial benefits and provides trivial benefits examples so you don’t fall foul of HMRC’s rules.
What is a trivial benefit?
Trivial benefits are tax-free employee benefits. They are described as ‘trivial’ because they should have little actual value. They’re usually small token gifts, like a box of chocolates or bunch of flowers to celebrate a birthday or anniversary. You don’t need to declare trivial benefits to HMRC and therefore you’re exempt from paying tax and National Insurance on them.
The idea of a ‘small gift’ is open to interpretation, which is why HMRC introduced legislation in 2016 which set out the conditions a benefit must meet before it can be classed as ‘trivial’.
According to HMRC, an employee benefit is ‘trivial’ if it:
When all of the above criteria is met, you don’t need to pay tax or National Insurance, or even declare it to HMRC.
Examples of trivial benefits
There is no definitive list of benefits that can be regarded as trivial. If the benefit is less than £50 and meets all the other criteria, it can be classed as trivial. Therefore, a trivial benefit can be a whole manner of different things. Here are some of the most common examples of trivial benefits:
Seasonal gifts
These are commonly a box of chocolates or a Christmas turkey. It could also be a flu vaccine as long as it’s an immunisation against routine seasonal flu and not a medical treatment.
Small gifts
If you send an employee a bottle of wine or a bunch of flowers to celebrate their birthday or a special anniversary, this could be treated as a trivial benefit.
Tea and coffee
Many employers provide free tea, coffee and water. As long as they meet HMRC’s criteria, these refreshments could be classed as trivial.
If you’re not sure whether a gift you give a member of staff can be classed as a ‘trivial benefit’, you can call HMRC’s employer helpline for advice.
Rewarding a group of employees with trivial benefits
We now know a trivial benefit shouldn’t exceed £50 and it’s usually easy to work out the cost when you’re buying an individual gift.
However, when you’re providing a benefit to a group of employees it can be a little trickier. For example, if you take your employees out to a restaurant to celebrate someone’s birthday and everyone orders something different from the menu.
When it’s impractical to work out what you’ve spent on each employee, you should calculate the average cost per person. If the average cost is less than £50 per person you should be able to treat this as a trivial benefit providing it meets the other criteria. When you’re deciding whether it’s appropriate to take an average cost per person, HMRC says it depends on the circumstances and advise you take a common-sense approach.
Trivial benefit rules for company directors
Directors of ‘close’ companies can’t receive trivial benefits worth more than £300 in total during a tax year. A ‘close’ company is a limited company that’s run by five or fewer shareholders who are all directors.
This £300 yearly limit is separate to the exemption for annual events, such as Christmas parties or summer BBQs. For such events, you may be able to claim up to £150 per employee and is separate to the trivial benefits rules.
Salary sacrifice arrangements
If you provide a benefit as part of a salary sacrifice arrangement, it can’t be classed as a trivial benefit – even if it meets the other criteria. That means you need to report it to HMRC and pay tax and NI. You’ll declare how much you paid for the benefitor the salary given up (whichever is higher) on the employee’s P11D form.
These rules don’t apply to salary sacrifice arrangements made before the 6 April 2017. If your arrangement was made before this date, visit the government’s website here.
Take the test: is this a trivial benefit?
It’s time to test your knowledge! You just need to tell us if the examples below are trivial benefits and therefore exempt from paying tax and tax and NI.
Question 1.
You send your employee a bunch of flowers to celebrate them reaching their sales target this month. The flowers only cost you £35 including delivery to their home address.
Is this a trivial benefit?
Question 2.
You give an employee a gift card which costs you £10 to provide. You then top up the same gift card by £10 on seven separate occasions.
Is this a trivial benefit?
Question 3.
You take a group of employees out for a meal to celebrate someone’s birthday. Five employees attend the meal, making different menu and drink selections, costing you £240 in total.
Is this a trivial benefit?
Reporting and paying tax on employee benefits that aren’t ‘trivial’
If the gift or benefit you provide an employee doesn’t meet the trivial benefits criteria, you need to declare it to HMRC and pay any tax or NI you owe. To do this, you’ll usually need to submit P11D and P11D(b) forms to HMRC for every employee who received expenses or benefits.
You don’t need to submit a P11D form for an employee if you’re paying tax on all their benefits through your payroll. This is sometimes known as ‘payrolling’ and you can do it as long as you’ve registered with HMRC before the start of the tax year. However, you’ll still need to submit a P11D(b) form so you can pay any Class 1A NI you owe.
Remember: If the cost of providing the benefit exceeds £50, the full amount is taxable, not just the excess over £50.
Protecting your employees and your business
Treating your employees – whether it’s through trivial or taxable benefits – is only one way to make sure you’re doing the right thing by your staff.
Even if you only employ one person, it’s important to have the correct level of employers’ liability insurance to protect them if they get injured or become ill as a result of working for your business.
Find out more about employers’ liability insurance from AXA or get a quote today.
Protection for your employees is a few clicks away
Life’s too short to get bogged down by complex insurance jargon – your time’s better spent running your business. That’s why we’re doing all we can to make insurance easier. Get an employers’ liability quote from as little as £49* with AXA.
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