Trivial benefits are not so trivial

A reminder that It is possible to make small tax-free payments to employees, including directors, and this might be an appropriate time to make a small tax-free bonus in advance of the annual Christmas, New Year holidays.

Employers and employees don’t have to pay tax on small benefits provided they comply with the following rules:

• it cost you £50 or less to provide,
• it isn’t cash or a cash voucher,
• it isn’t a reward for work or performance related activity
• it isn’t in the terms of an employees’ contract.

HMRC describes these payments as a ‘trivial benefit’. Based on the national mood following months of COVID disruption, these so-called trivial benefits now seem a possible means to spread a little good cheer.

A word of caution

Where the employer is a close company, and the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year.

Secondly, if you provide a benefit to a group of employees and it is impractical to work out the exact cost per head, then it is acceptable to average the cost per employee.