Trivial benefits - big tax saving
Occasional treats for employees can be provided as tax-free trivial benefits if four conditions are met:
- the treat is not cash or a voucher that can be exchanged for cash
- the cost of providing each treat doesn’t exceed £50 per employee
- the employee is not entitled to receive it as part of any contractual obligation
- it’s not provided in recognition of particular services performed by the employee as part of their employment duties.
Say the employer promises to provide bacon rolls to those employees who are required to do a stock-take before the business opens every Friday. That would amount to a reward for those early starters, so condition 3 is broken.
If the employer provides the bacon rolls as an unexpected treat to employees, that can be classified as a trivial benefit as the employees don’t have to do anything in order to receive the bacon roll. Incidentally, where all staff at a particular workplace are provided with free or subsidised meals, and the conditions for a staff canteen are met, those meals would be a tax free benefit.
The employer can provide an unlimited number of treats to the employees, but regular gifts could come to be expected as part of the reward for turning up to work, and so condition 4 would be broken.
Each gift also needs to be distinct and not part of another promise or item. Say the employees are each given a gift card, which is topped up at the employer’s discretion. That amounts to a single item (the gift card) per employee, so as soon as the value added to the card exceeds £50 the conditions for a trivial benefit would be broken. If the employer provided new gift cards to employees as treats, each card would be seen as a separate gift and thus could contain up to £50 of value.
Where trivial benefits are provided to a director of a close company or to a member of their family or household, there is an annual cap on the value of items which can be treated as trivial benefits: £300 per year.