UK Trivial Benefits Law Makes Giving Gifts To Employees Easier

trivial benefits employee gift present

Whether you’re trying to incentivise employees to stay or just being nice, giving gifts to your employees is an increasingly popular practice. What many people forget however is that this represents a kind of income. If you are too generous with your gifts, the recipient could be hit with a benefit in kind tax, and punished for accepting your present.

Thankfully for businesses in the UK, there’s an easy solution: 2016’s Trivial Benefits In Kind Exemption. The addition to the Finance Bill simplifies the whole process, breaking down precisely what does and doesn’t constitute a breach of the tax law. Overall, it makes it much easier to give gifts in the knowledge that they won’t be subject to tax.

Trivial Benefits Exemption

To qualify, a gift must adhere to the following conditions:

  • Maximum £50 per benefit per person
  • Cannot be cash or cash vouchers (gift cards are acceptable)
  • No contractual entitlement to the benefit
  • Not given as a reward for specific work related services or duties
  • For close companies (as defined here), a maximum annual exemption of £300 for directors and office holders only. The limit does not apply to normal employees

Exemptions do not need to be counted as taxable income or towards Class 1 national insurance. Notably, they can also apply to members of an employee’s family or household, meaning that a spouse can benefit from a trivial benefit from a company party or event.

It’s especially important however not to go above £50 per person. If this individual value or collective average is breached by even a penny, the entire amount is taxable, not just the amount you breach the limit by.

Here are some examples courtesy of HMRC of what you can and cannot gift:

Eligible Trivial Benefits

  • A group meal to celebrate a birthday
  • A Christmas present
  • A summer garden party
  • A bunch of flowers for a new mother

Ineligible Trivial Benefits

  • Buying a working lunch
  • A gift to celebrate hitting an employment target
  • Team building events or related gifts
  • Transport for employees working overtime (excepting certain circumstances)

There is also no change to the rules regarding entertaining and corporation tax. A party which qualifies for Trivial Benefits Exemption may also qualify as entertaining, which may mean that it cannot be counted towards corporation tax.

As always, we advise that you consult with a specialist accountant to assess how this law impacts your company. For more information and the latest on UK and European tax law, feel free to contact us here.