A reminder about ‘TRIVIAL BENEFITS’

I have read that it is now possible to pay staff tax-free using small value benefits in kind. Is this correct?

The “Trivial Benefits” rules have been introduced for the tax year 2016-17 and onwards. In general terms, no income tax charge arises on a benefit provided to an employee (or member of an employee’s family or household) if four conditions are met:

  • The benefit is not cash or a cash voucher
  • The cost of providing the benefit does not exceed £50
  • The benefit is not provided as a result of a salary sacrifice arrangement
  • The benefit is not provided in recognition of services provided by the employee or in anticipation of such services.

There is an additional rule for directors and their families which imposes a £300 annual limit. This £300 limit might lead one to suppose that non-directors will be able to enjoy tax-free a series of small benefits totaling at least £300 in a tax year and possibly even more. This is a situation where the fourth of the conditions listed above needs careful consideration. HMRC have in the past in certain circumstances taken the view that where some form of non-contractual award is made to employees so regularly that employees develop an expectation of receiving such rewards then the rewards become, in effect, contractual payments for services rendered and are therefore taxable. It will be interesting to see how this particular area of tax law develops.

Employers may also wish to consider potential employment law implications.

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