If your business is on the lookout for new ways to boost morale and improve employee happiness, you may want to explore the option of offering ‘trivial benefits’.
What is a trivial benefit?
A ‘trivial benefit’ is a gift to an employee that meets the following criteria:
- it costs 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.
*Where a trivial benefit is offered to multiple employees and it is difficult to determine the exact cost to each individual, you can take the average cost to satisfy these conditions.
Trivial benefits are not required to be reported to HM Revenue and Customs (HMRC), nor are you required to pay tax or national insurance on them. This is the reason why so many companies are making use of them.
Examples of trivial benefits
When meeting the above criteria, common examples of gifts that can be classed as trivial benefits are:
- taking staff out for meals
- drinks/alcohol for the office
- flowers
- gift cards – not exchangeable for cash
- chocolates and other confectionary.
This list is not exclusive as there are many benefits that a business can offer within the exemption.
How this benefits the business
There are many reasons to offer employees these benefits, including improving employee motivation and happiness, and helping to attract and retain valuable staff members. According to research by ‘The New England Journal of Medicine’, these types of smaller, more frequent gifts have more effect than offering a large reward at the end of a year.
There are no restrictions to how many trivial benefits that you can give to your employees each tax year, however if you are a director or office holder of a ‘close’ company, trivial benefits you receive cannot exceed £300 in a tax year. A close company is a limited company that is run by 5 or fewer participators.
Examples of other non-taxable benefits
There are many other benefits that you can offer to your employees that are non-taxable, which have less restrictions than the trivial benefits described above, a few examples of these are as follows:
- providing a mobile phone for work purposes – 1 per employee
- employer contributions to a registered pension scheme
- car parking spaces
- subsidised meals in the office canteen.
Long-service awards
If you have employees that have been with the business for many years, you may want to go to the extra mile to reward their loyalty. You can do this by offering them a long-service award (LSA).
For reporting and tax purposes, HMRC do not need to be notified if all of the following apply:
- the employee has worked for you for at least 20 years
- the award is worth less than £50 per year of service
- you have not given them a long-service award in the last 10 years
- the award is not cash.
Therefore, you could give a non-cash award with a value of up to £1,000 for 20 years’ service, for example a watch.
Again, these benefits promote loyalty and engagement to the business and can be a nice gesture to an employee without suffering any tax implications, if utilised correctly.
The next step
If you would like more guidance on the benefits which you can offer to your employees and the potential implications of them, or any other tax matters, please do not hesitate to contact Joe Stuart on j.stuart@uhy-manchester.com, Niall Pearson on n.pearson@uhy-manchester.com, or your usual UHY adviser.
