Although designated as ‘trivial’ by the taxman, trivial benefits in kind can result in tax savings for you and your employees, which can be anything but trivial.
The rules cover benefits such as taking employees out for meals or giving gifts at Christmas – costs which can quickly add up and might, over the course of the year, attract a hefty tax bill.
New rules introduced a year ago overhauled the procedures for taxing trivial benefits in kind. The reforms mean that any benefit that meets the following criteria set out by HM Revenue & Customs is exempt from income tax and national insurance:
- The cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person);
- The benefit is not cash or a cash voucher;
- The employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements); and
- The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services).
The rules differ slightly for office holders of the company, family members and members of the household. In these cases the exemption is capped at £300 in total for the tax year.
If you are satisfied that benefits provided to your employees meet the definition of a trivial benefit in kind, then you do not need to include them on a P11D.