The festive season is rapidly approaching and it is natural to want to treat your employees.
Unfortunately, even small gifts can have implications for your tax and National Insurance Contributions (NICs), so you should understand the implications of any kind gestures. We are here to help you understand how to spread festive cheer while staying tax-efficient.
What are trivial benefits in kind?
Trivial benefits are small, non-cash gifts or perks given to employees.
In order for benefits to qualify as ‘trivial’, they must meet specific requirements from HMRC.
The gift must:
- Cost £50 or less
- Not be cash or a cash equivalent (like gift cards exchangeable for cash)
- Not be a reward for work or performance
- Not be part of an employee’s contractual benefits
- Not replace salary or bonuses
The most common examples of trivial benefits include seasonal gifts, like a hamper or wine but can also include flowers or theatre tickets.
Directors can also receive trivial benefits, but these cannot have a combined worth of more than £300 per tax year.
What are the tax liabilities of trivial gifting?
Trivial benefits can be extremely tax-efficient. If they meet all of the requirements above, they are completely exempt from tax and NICs.
There is currently no need to report qualifying gifts to HMRC on your company’s P11D form.
It is important to declare any gift that does not fall within the criteria. They will need to be recorded in the same way as other benefits and will be liable to tax and NICs.
You should track your trivial benefits to ensure that they meet the criteria and you remain compliant.
We can help you manage your obligations so your festive cheer does not turn sour.
To incorporate tax-efficient gifting into your business strategy, please get in touch with our team.
