BENEFITS:
Tax on trivial benefits
You don’t have to pay tax on a benefit for your employee if all of the following apply:
it cost you £50 or less to provide
it isn’t cash or a cash voucher
it isn’t a reward for their work or performance
it isn’t in the terms of their contract
This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.
You have to pay tax on any benefits that don’t meet all these criteria.
If you’re not sure whether a benefit counts as a trivial benefit call the employer helpline.
Salary sacrifice arrangements
If you provide trivial benefits as part of a salary sacrifice arrangement they won’t be exempt. You’ll need to report on form P11D whichever amount is higher:
the salary given up
how much you paid for the trivial benefits
These rules don’t apply to arrangements made before 6 April 2017 - check when the rules will change.
Directors of ‘close’ companies
You can’t receive trivial benefits worth more than £300 in a tax year if you’re the director of a ‘close’ company.
A close company is a limited company that’s run by 5 or fewer shareholders.
What are Trivial Benefits?
What are trivial benefits? An explanation of the staff benefits you can give without incurring tax. From April 2016, legislation was introduced providing clarity as to what small benefits are deemed to be trivial and therefore exempt from tax and reporting obligations.
Conditions to be satisfied
If any of the conditions above are not satisfied then the benefit is taxed in the normal way – this is done via a P11D, PSA or taxed through payroll. Please note that if the cost of the benefit exceeds £50, the whole amount will be taxable not just the excess.
Examples of trivial benefits
Per HMRC’s guidance, examples of trivial benefits are:
taking a group of employees out for a meal to celebrate a birthday;
buying each employee a Christmas present or birthday present;
flowers on the birth of a new baby;
a summer garden party for employees.
The limit of £50 applies to each.
Non-taxable benefits
Certain other benefits you provide to your employees are not taxable. This can be a good way to incentivise staff, as well as being tax efficient from an employer’s perspective.
Some of the most common examples are:-
Payments for business mileage in an employee’s own car, provided they are within HMRC approved rates (45p per mile for the first 10,000 miles and 25p per mile thereafter). Any excess above these amounts will be taxable
Employer payments into a registered pension scheme
Medical treatment to help an employee return to work after an absence (or expected absence) of at least 28 days, up to a maximum cost of £500
One health screening assessment and one medical check-up per year, but any follow up treatment is taxable
Meals provided in a staff canteen and light refreshments at work
Parking provided at or near an employee’s place of work
Workplace nursery places for the children of employees and childcare vouchers (if entered in the voucher scheme prior to October 2018). For new parents, information on applying for tax-free childcare can be found at gov.uk/get-tax-free-childcare
Removal and relocation expenses up to a maximum of £8,000 per move
One mobile phone per employee, registered in the employer name
Annual social functions for employees provided that, in any one tax year, the total cost does not exceed £150 per head (including VAT)
Use of a pool car – this is a vehicle made available for use by more than one employee, with very limited private use, which is not normally kept overnight near the residence of any of the employees
Expenses that are paid or reimbursed by employers, so long as they were incurred entirely for business purposes. This includes office equipment bought by an employee for home working however this must be discussed in advance. Any significant private use element should be subject to tax and NIC via the payroll.
Additional household expenses incurred whilst your employee is working from home (e.g. electricity, heating or broadband) can be paid at a flat rate of £6 per week from 6 April 2020.