From the 6th April 2016 an employer can provide trivial benefits to their employee and there will be no taxable benefit implications for that employee. In prior years this type of benefit was also allowable, but up until now there had been no fixed value that was specifically stated, so it relied on a “common sense” approach by the HMRC Inspector. The new Finance Act has provided more guidance, including the fact that it can apply to directors under certain circumstances.
HMRC state the following on their website:
“The benefit is exempt from tax if all the following conditions are satisfied:
- 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 (gift cards are fine, as long as they are not exchangeable for cash)
- the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements)
- 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)”
If the employer is a close company (broadly speaking this means under the control of 5 or fewer people) and the benefit is provided to 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.
What about the £150 allowance for staff entertainment?
As with the staff entertainment exemption the “new” trivial benefit exemption of £50 is a cliff edge amount – go 1p over and the whole amount becomes taxable, not just the excess amount. This benefit is in addition to the staff entertainment benefit too, so you could take your team out for Christmas dinner and also buy them a present!
A word of caution
Do keep in mind that you cannot simply combine the two allowances, you must still not exceed £150 for entertainment in a tax year and £50 for each trivial benefit, limited to £300 for a director or office holder. You cannot simply take the amount in cash, or gift anything that can be exchanged for cash.
What should you do?
Ensure that you keep your usual detailed records of expenditure and copies of receipts, allocate the cost to Sundries in your accounting records, and rest easy knowing that the bunch of flowers your company gave as a birthday gift, the meal you and your fellow director had or the team drinks you had on a Friday night are covered by the exemption, and also tax deductible for your company!
Please note that this blog is intended as an overall introduction to the subject matter, and should not be taken to be exhaustive or specific advice. You should discuss your individual personal circumstances with your own professional adviser before taking any action.