Introduced in April 2016, the Trivial Benefits legislation outlined which small benefits could be issued to employees without tax or reporting obligations. Trivial Benefits are often overlooked by small businesses but can be an effective way of boosting morale in a tax-efficient way.
Treating your team every now and again is an important part of being a director as it shows your appreciation for the work they do and that you’re interested in their fulfilment, not just profit margins. However, HMRC has some specific guidance on what you can treat your staff to, without it being reportable as a benefit in kind.
The guidelines state that each gift:
- must cost you £50 or less to provide
- isn’t cash or a cash voucher
- isn’t a reward for work or performance
- isn’t in the terms of their contract
Crucially, if any benefit exceeds the £50 limit then the whole amount is taxable, not just the excess.
It should also be noted that if you are the director of a ‘close’ company with fewer than five shareholders, you cannot receive over £300 worth of trivial benefits in each financial year. This said, trivial benefits still provide a nice tax-free way of treating yourself, even if you’re the only director of the company!
So now that’s the rules out of the way, what can you treat yourself and your colleagues to?
Buying individual gifts can be a time-consuming process if you manage a large team but it also gives you the opportunity to show how well you know your staff. We’ve recently covered gift ideas for the self-employed on our blog but sites such as Etsy and Not On The High Street are a great place to start looking as they support small businesses and offer some great customisation options, giving your gifts the personal touch.
Whilst cash isn’t allowable, you could reward your team with gift cards or shopping vouchers (provided they can’t be exchanged for cash). This can prove a really thoughtful gift as not everybody wants to spend their Friday night in a swanky bar and those with children know the financial pain that often accompanies a trip to the supermarket so why not help them out?
Food & Drink
If your office is anything like ours, excitement builds as soon as food is mentioned. However, be aware, working lunches are not tax-exempt as they are part of the employee’s working day. You can, however, treat your team to a celebratory meal outside of work as long as it is open to all staff members and not to reward a performance-related target.
Whether it’s a celebratory bowling trip or a sun-drenched summer picnic, you can treat your team to an event as long as the cost per head doesn’t exceed £50 per employee. The specific individual costs of a group event can be difficult to calculate but HMRC will accept an average cost per head.
This doesn’t include the annual staff event, such as a Christmas party, which allows up to £150 per head to be spent without declaring it.
If you’d like to know more about trivial benefits and the opportunities they present to your business, contact your accountant or call our friendly team on 0800 195 3750 and we’ll be happy to help.