Making use of the ‘fun’ trivial benefits

Running your business as a limited company can offer many benefits (and disadvantages if not done right). Aside from potentially paying less tax and having limited liability, there are some fun tax benefits too that are rarely spoken of.

As a business owner with a team of staff to look after, these trivial tax benefits might help your staff and be useful to tap into. After all, happy staff = better work morale.

Trivial Benefits

Trivial benefits apply when the management of a company gives their employees gifts throughout the year. Think about these gifts as improving the morale of your team and making them feel appreciated. Before you rush to spend though, there are some rules for each employee:

· It costs £50 or less to provide

· It isn’t cash OR a cash voucher

· It isn’t a reward for their work or performance

· It isn’t stated in the terms of their contract

When the above conditions are met, there is no need to inform HMRC as it does not affect the employee’s taxable income or National Insurance (NI). Therefore, a P11D form* is not required for trivial benefits. This is essentially a benefit for both the employer and employee.

*A P11D form is what an employer uses to provide details on certain expenses and benefits that are liable to pay tax on. These are submitted every tax year to let HMRC know of any expenses payments, benefits and facilities given to each employee or director. This could include company cars, credit card expenses, private medical insurance and so on.

Some examples of trivial benefits

· Birthday presents

· Pizza in the office

· Few drinks on a work night out

· Bottle of whisky

Over the limit

If the gift is over £50 the whole amount is taxable on the employee as a Benefit in Kind (BIK). A BIK is any non-cash benefit that you provide your employees that has monetary value. These benefits can also be referred to as ‘notional pay’ or ‘perks’. Because the benefits have monetary value, they must be treated as taxable income. Therefore, these would be included on the P11D form and additional taxes would be paid by the employer and employee.

Other rules to bear in mind

There is a limit for directors of a ‘close company’. A close company is a privately owned company with 5 or fewer directors. The limit for these companies is £300 per employee in total over the year following the same rules above. The limit for these companies is £300 per employee in total over the year following the same rules above.

Worried about treading the line?

If you are unsure about whether something constitutes as a trivial benefit or Benefit in Kind, always be sure to ask your accountant.

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