Trivial Benefits vs. Benefits In Kind

With P11d season now upon us, declaring benefits in kind (and paying the relevant NI liability) may well be at the forefront of your mind. But did you know that there is such a thing as ‘trivial benefits’, that are totally tax/NI free for your employee?

What is the difference between benefits in kind and trivial benefits?

Most items or services that you or your employees receive from the company in addition to salary, or any expenses that have been put through the company that are not wholly, exclusively and necessarily for the purpose of the business, will be deemed to be a benefit in kind. These will include things like private healthcare and gym membership. These benefits in kind essentially increase the employee’s salary and therefore have additional tax and NI applied.

However, you may wish to treat your employee for a job well done without them being hit with an extra bill. Well, provided you stick to a few rules, your gift will be deemed to be a trivial benefit, and there will be no additional liabilities for the recipient.

The Rules:

There are of course criteria that must be met to be able to claim a ‘trivial benefit’. These are that the benefit must not:

• Exceed £50 (not even by 1p or the whole amount becomes taxable). If, for example, you take a number of staff out for a meal, this can be averaged out per head.

• Be cash (although gift vouchers are allowable, provided they can’t be exchanged for cash).

• Be a reward of normal employment duties.

• Be part of any contractual obligation/salary sacrifice scheme.

As with any business expense, you will also need to ensure that you retain the receipt(s) for the expense, and keep a note of what it was in respect of, to prove it did not breach any of the above. Provided that all of this criteria is met, the recipient will not have to pay any tax or national insurance on the benefit, and the company will receive corporation tax relief on the amount.

Company Director? You can treat yourself too!

And the great news is that this also applies to company directors. The only difference being that whilst for staff, there is no cap to the amount of trivial benefits that can be provided, for directors, there is an annual £300 cap. Again, each benefit must not exceed £50, and receipts must be retained.

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