Trivial benefits provided by employers – ITEPA 2003, s 323A
Normally if something is trivial you would ignore it, however in this case trivial is in the eye of HMRC, not the director or employee!
From 6 April 2016 an employer can give an employee a present without putting it on a P11d (Return of Benefits) and there will be no tax or national insurance payable on it by either the employer or employee. The bonus for the employer is that they can also claim income tax or corporation tax relief on the gift as well as having a happy employee.
Sounds too good to be true, well there are some 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
Directors are employees so will be able to enjoy this as well. There is however a £300pa cap for them, which, if they are higher rate tax payers, would save £126 in tax & NIC if they had the gifts rather than salary.
HMRC have helpfully given the following examples (taken from their employment manual)
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.
Employer B provides each of its 100 employees with a turkey at Christmas and the total bill comes to £4,500. There are a variety of sizes. Because the employer has made a bulk order, the turkeys have not been priced up individually but would cost in the region of £40 to £60 each. Employees are able to choose which bird they have. Rather than undertake a detailed analysis of the individual benefits, you should accept that the cost per head is £45, reflecting an average amount of £4,500/100. The benefit can be covered by the exemption since the cost for each employee does not exceed the trivial benefit financial limit.
Employer C provides each member of its 25 strong work-force with a bottle of wine at Christmas. The total bill comes to £1,000. This reflects 20 bottles of wine that cost £15 per bottle provided to each of its employees, and 5 bottles of wine provided to each of its directors that cost £140 per bottle. In this case it is not impracticable to determine the cost of the individual benefit and the actual cost per item should be applied in determining whether the monetary limit has been exceeded for each employee and director. The benefit of the £15 bottles of wine can be covered by the exemption since the cost does not exceed the trivial benefit financial limit but not the benefit of the £140 bottles provided to the directors.
So just off to enjoy my wine which the directors are about to buy me because they are in a good mood and not because I am wonderful employee………….
If you wish to discuss this further please do hesitate to contact us on 0116 2423400 or click here.
Denise Burley, Accounts & Tax