For the next few weeks, our blogs will be focusing on the ‘All You Need to Know About…’ various different elements of running your own business.
This week, we are starting with all you need to know about Trivial Benefits.
What is a Trivial Benefit?
Essentially, a trivial benefit is a way for you to reward your employees (or even yourself!) without them being hit with an additional tax or NI bill, in the way that they would with a benefit in kind.
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.
Good news for company directors… but not sole traders
If you are a company director then the good news is that you are also able to gift yourself trivial benefits. 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.
Unfortunately, sole traders are not able to claim trivial benefits for themselves, although if they have employees then the employees can be gifted trivial benefits following the rules above.
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