As a business owner, you want to do everything you can to keep your employees happy and engaged. You might have given them small gifts as well.
But did you know that providing trivial benefits could also help reduce your tax bill? Here are three tips for providing trivial benefits that will save you money come tax time.
What are Trivial Benefits?
Trivial benefits are those small perks or gifts that you may provide to your employees that have a relatively low monetary value. While these types of benefits may seem insignificant, they can actually add up and provide a significant tax break for your business.
Some common examples of trivial benefits include:
- Small gifts, such as chocolates or bottles of wine
- Discounts on products or services
- Vouchers for free or discounted items
- Free or discounted tickets to events
In order for a benefit to be considered trivial, it must meet all of the following criteria:
– The cost of the benefit must be less than £50 per person per tax year
– The benefit must not be cash or a cash voucher
– The benefit must not be a reward for good performance
– The benefit must not be part of a salary sacrifice scheme
If the benefit costs more than £50, the entire amount is taxable, not just the excess over £50. When it’s difficult to estimate an individual cost because it’s a group event, then use the average cost per employee as your guide.
Why Provide Trivial Benefits?
Happy employees are productive employees. By offering trivial benefits, you can show your appreciation for your employees without breaking the bank. And, because these benefits are tax-free, they’ll be that much more valuable to your team.
Trivial benefits can be used as a tax-efficient way to reward and motivate employees to work. Such gifts can be tailored specifically to the needs and preferences of employees and does not involve any administrative burden.
Tax Implications
For Trivial Benefits, you won’t need to pay tax or National Insurance, and you don’t have to notify HMRC. This means that they can be provided without any tax implications for either the employer or the employee.
As trivial benefits are exempt from tax and National Insurance, there are no implications for either the employer or the employee. This means that they can be provided without any tax implications for either party.
Directors of private companies are not allowed to receive benefits with a total value of more than £300 in any one tax year, and no individual benefit can be worth more than £50. A “close” company is a limited company with five or fewer shareholders who are all directors. This £300 limit is in addition to the exemption for annual parties, such as a Christmas party.
Tips for Providing Trivial Benefits
1. Keep the Cost Per Person Low
As a general rule of thumb, the cost of a trivial benefit should be less than £50 per person per tax year. This limit applies to the total value of all benefits received, not just individual items.
You can buy anything that you think your employees would enjoy, but some common examples include:
– Gift vouchers
– Free or discounted tickets to events
– Small gifts, such as chocolates or bottles of wine
– Discounts on products or services
Make sure to keep track of the cost of each benefit so that you don’t inadvertently go over the £50 limit.
2. Avoid Giving Cash
It’s important to avoid giving employees cash or cash vouchers as these do not qualify as trivial benefits and will be subject to tax and National Insurance.
Giving a cash or cash voucher can lead to an unexpected tax bill for both the employer and the employee, so it’s best to avoid this if possible.
3. Use HMRC Helpline if Confused
If you’re unsure whether or not your benefit meets the criteria for triviality, you can use HMRC’s online tool to help you determine whether or not it qualifies.
You can also contact HMRC’s Employer Helpline on 0300 200 3200 for more information.
As you can see, there are a few things to keep in mind when it comes to trivial benefits. However, as long as you understand the rules and regulations surrounding them, you should be able to provide your employees with these types of benefits without any problems.
To know more, get in touch with us today.
