"Trivial" benefits and the tax implications
Since 2017 employers have been able to provide any number of small (trivial) benefits in kind to their employees without them counting as taxable benefits. HMRC relies on 3 factors to prevent the exemption being exploited;
- the exemption doesn't apply if it's a substitute for normal wages (including performance bonuses)
- employers are cost conscious so won't want to pay for large number of perks for employees
- the above doesn't apply to directors who might be tempted to take more perks for themselves. Therefore the exemption is capped for directors of "close" companies (a limited company run by 5 or fewer shareholders), at £300 in a year.
Specific HMRC guidance says;
You don’t have to pay tax on a benefit for your employee if all of the following apply:
- it cost you £50 or less to provide
- it isn’t cash or a cash voucher
- it isn’t a reward for their work or performance
- it isn’t in the terms of their contract
This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.
The rules don't prevent the exemption from being used multiple times in a short space of time. In addition, if your partner or spouse is also a director, the exemption could cover both people without triggering tax or NI.
But before you rush off and get spending, here's some things to check;
- Is it a personal bill? If so, that's not a perk since it's equivalent to cash. For example, if the company pays a bill for your home broadband, that's not a perk, it's salary. However, if the contract for broadband is between the company and the provider, that's a perk and the exemption can apply (but see the next point).
- Is it a continuous service? If so, then the whole contract and not the monthly bill counts as a single benefit. So in the broadband example, it doesn't really work if the company contracts for your home broadband - because it's a single benefit counted over the lifetime of the contract.
- Is it cash or a cash voucher? If so it's not a perk and needs to be counted as salary. However, a retail voucher can be counted as a perk; watch out, though - if you buy 2 vouchers from the sale time and the same place, HMRC could count these as a single benefit.
If you provide trivial benefits as part of a salary sacrifice arrangement they won’t be exempt. For all these non-exempt perks, you’ll need to report on form P11D whichever amount is higher:
- the salary given up
- how much you paid for the trivial benefits