As an employer or director, you might want to show appreciation to your team or treat yourself with a little something now and then. But did you know there’s a way to provide small, tax-free perks without triggering a tax liability?

Trivial benefits are a great way to do just that.

Here’s a straightforward guide to help you understand what qualifies as a trivial benefit, the rules around them, and how they can apply to both staff and directors.

What Are Trivial Benefits?

Trivial benefits are small gifts or perks that you, as an employer, can provide to employees – including directors – without the need to pay tax or National Insurance or report them to HMRC.

These benefits are often used as “thank you” gestures or as a way to boost morale and can be used for items like gift cards, flowers, or small tokens.

To qualify as a trivial benefit and stay tax-free, the perk needs to meet a few specific conditions. Here’s what you need to know.

Rules and Conditions for Trivial Benefits

For a benefit to be considered trivial (and therefore tax-free), it must meet ALL the following four criteria:

1. Cost: The benefit must cost £50 or less per person. This is the total cost, including VAT. If the value is even a penny over £50, it no longer qualifies as trivial, and it becomes a taxable benefit.
2. Not Cash or a Cash Voucher: The benefit can’t be cash or a voucher that can be exchanged for cash. Non-cash vouchers (like gift cards for stores or restaurants) are fine as long as they meet the £50 limit.
3. Not Related to Work Performance: The benefit can’t be a reward for work done or tied to job performance. For instance, a £50 gift for meeting a target or achieving a goal won’t count as trivial. Instead, trivial benefits should be occasional, unexpected treats – like a small gift for a birthday or to mark a seasonal occasion.
4. No Contractual Obligation: There shouldn’t be any contractual obligation to provide the benefit, and it can’t be something an employee is entitled to as part of their job. Trivial benefits should be genuinely optional and given at the employer’s discretion.

Trivial Benefits for Staff vs. Directors

For Staff

As long as the benefits meet the conditions above, there’s no annual limit to the number of trivial benefits you can provide to your employees. This means you can treat your team to multiple small gifts or perks throughout the year, tax-free, provided each one doesn’t exceed £50 and meets the criteria.

For Directors

Directors of close companies (typically, companies controlled by five or fewer shareholders) have a bit more of a restriction. While staff can receive unlimited trivial benefits, directors are capped at receiving no more than £300 of trivial benefits per tax year.

For example, a director could receive six separate £50 gifts over the year without triggering a tax liability, but if they receive a seventh gift, it would exceed the £300 limit, making the entire amount taxable. This £300 limit applies to directors only and not to regular staff.

Examples of Trivial Benefits

Here are a few examples of what could qualify as a tax-free trivial benefit:

• A £30 gift card for a popular coffee shop, given as a holiday treat.
• Flowers or chocolates for an employee’s birthday.
• A bottle of wine or a box of chocolates to celebrate a festive season.
• A small meal or coffee out with colleagues, so long as it’s not work-related.

What Does Not Qualify as a Trivial Benefit?

Understanding what doesn’t qualify is equally important. Here are some examples that wouldn’t meet HMRC’s trivial benefits conditions:

• Cash Bonuses: Any amount of cash given to staff, regardless of the amount, would be taxable.
• Performance-Related Gifts: If a gift is given as a reward for meeting sales targets, completing a project, or any work-related achievement, it’s not considered trivial and would be taxable.
• Items Over £50: Even if it’s just £50.01, the benefit won’t qualify and would be taxable.

Record-Keeping Tips for Trivial Benefits

It’s good practice to keep a record of any trivial benefits you provide, especially for directors who have a £300 annual cap. Keeping track of the dates, recipients, and cost of each gift will help ensure you stay within the rules and can avoid any issues if HMRC comes knocking.

Ideas for Offering Trivial Benefits

Offering trivial benefits can be a meaningful way to foster goodwill and show appreciation without incurring tax. Here are a few ideas for small perks that employees often appreciate:

• Seasonal Treats: Offer holiday-themed gift cards, like coffee or festive food items, to help your team feel valued.
• Welcome Packs for New Starters: Put together a small welcome gift (up to £50) for new staff members, such as a personalised mug or company-branded items.
• “Thank You” Gifts: Surprise an employee with a small gift card or voucher just to say thanks, but be sure it’s not tied to any specific job performance.

Wrapping Up: Keeping It Trivial and Tax-Free

Trivial benefits can be a powerful way to enhance staff morale and recognise directors without worrying about extra taxes.

By following the rules and ensuring each gift meets HMRC’s guidelines, you can enjoy the tax-free perk of giving small treats throughout the year.

Just remember the key points – £50 or less, non-cash, no strings attached, and no contractual obligation.

With careful planning and attention to these simple guidelines, you can provide thoughtful, tax-free perks that show appreciation and make your workplace a little bit brighter. 🎁