Business owner asks:
What are trivial benefits and how tax efficient are they?
Acumenica answers:
A trivial benefit is a small token or gift given to employees by their employer. They can come in many forms but are generally gestures such as bottles of wine, a staff meal out, the works summer BBQ etc.
What does HMRC consider a trivial benefit?
In order to qualify as a trivial benefit in the eyes of HMRC, the benefit satisfy the following criteria:
- The benefit costs £50 or less
- The benefit isn’t cash or a cash voucher
- The benefit isn’t a reward for performance
- The benefit isn’t an ongoing cost or reward such as a membership
- The benefit isn’t outlined in the worker’s contract
The benefit MUST cost less than £50
This is very important. If the benefit costs even £1 more than £50, then the entire amount becomes taxable, subject to NIC, and reportable.
Close companies - benefits to directors
A close company is a business with five or fewer ‘participators’ or a company where all participators also act as directors. A participator is any party with a financial obligation to the limited company. The vast majority of small businesses in the UK will be a close company.
If you’re the director of a close company – which many limited company contractors are – you can still receive trivial benefits. The cost of these is capped at £300 per director per year.
The Acumenica team are on hand to help business owners with all tax matters. To arrange a no-obligation confidential chat, please complete the form on our Contact Us page or call 03330 166559.
