There are benefits which an employer can provide to their employee’s tax free, which are known as trivial benefits. These do not require disclosure on P11D’s and will not attract the additional tax and national insurance which other benefits in kind do. For something to qualify as a trivial benefit it must meet the following criteria:
- Cost less than £50 to the employer
- Is not cash or a cash voucher
- Is not a performance reward
- Is not part of a contractual agreement or a salary sacrifice scheme
The cost to the employer must not exceed £50 inc. VAT.
The trivial benefit can not be paid as cash to an employee nor can cash vouchers (vouchers which can be exchanged for cash) be offered.
A gift does not qualify as a trivial benefit if it is provided as a recognition of services. HMRC provide an example of a free lunch provided by an employer to employees who have been requested to work through their lunch. This would not qualify as it is deemed compensation for the loss of their lunch break.
A gift provided under a contractual agreement including under salary sacrifice cannot qualify as a trivial benefit no matter how small. Contractual agreements include but are not limited to staff handbooks, employment contracts and redundancy agreements. Any benefits provided under such agreements are required to be disclosed on a P11D and additional tax and national insurance will be liable.
Common Trivial Benefits
Common trivial benefits provided to employee’s include:
- Restaurant vouchers (not exchangeable for cash)
- An experience
- A meal
- Food hampers
Directors (including family members) of a close company, cannot receive trivial benefits of more than £300 in a tax year.
There are no annual limits for employees but it is important that the criterial detailed above is met on each occasion.