The exemption for trivial benefits for this year will end on the 5th of April – at the end of the 2017/18 tax year. So make sure you take advantage of the enticing range of tax free perks whilst you can!
What exactly are trivial benefits?
“Trivial benefits” are seen as small perks that an employer can provide to their employees without having to pay tax on them. To keep this to manageable levels there are several things that HMRC rely on to make sure that the exemption is not being exploited.
- If the benefit is instead of normal wages no exemption applies
- Employers will exercise caution as they won’t want to pay for perks for huge numbers of employees therefore the use will be kept to manageable levels
- The exemption is capped for directors of close companies to £300 – this aims to bring down the number of directors doing this for themselves
So the cap for directors is £300 per year and for employees and directors it is up to the value of £50 per benefit. This means a director can over the course of the year take up to 6 tax and NI free perks as long as they fall under the £50 threshold.
As the regulations don’t specify a ‘per month amount’ this means that the full £300 could be used in a relatively short space of the time i.e. if the end of the tax year was approaching the full amount could potentially be used in the preceding month.
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It’s a family affair
If your spouse or partner is also a director, they are in line for their own trivial benefits which can be used at the same time as yours. This means that for something like a ticket for a sports match – if your partner uses their exemption to buy another ticket you could enjoy a day out on the company with no tax or NI needing to be paid on the ticket cost! Sounding too good to be true?
Be careful to know your trivial benefit limits
Before getting too carried away it is important to exercise some caution on this to avoid falling foul of HMRC. It’s important that certain guidelines are followed to make sure you get the most out of this very appealing set of rules:
- Trivial benefits can include things like flowers, chocolate, wine, hampers, taking staff for meal
- Remember that the benefit must NOT be a cash payment – gift vouchers are allowed but only as long as they can not be exchanged for actual cash. They should also be purchased at separate times from online retailers such as Amazon/Tesco – don’t go for six vouchers from the same place at the same time or this will be viewed as a single benefit
- Be any more than £50 i.e. even £50.01 is not acceptable. If you do go over full value of the benefit will be taxable
- When relating to a service between you and a company the usual tax rules apply i.e. home broadband. However if the broadband contract is between your company and the broadband provider for a single bill this is allowed as a perk
- The payment can not be for an ongoing or reoccurring cost i.e. yearly gym membership, annual broadband cost
So to clarify – the limits are £50 for employees with an annual cap of £300 for directors.
Another blog you may find of interest…. Is there confusion over Trivial Benefits exemption
We’ve added a short video to show the current HMRC rules on Trivial Benefits. Have a look.