Another year is drawing to a close and with the festive season swiftly approaching, many employers will be wanting to give their employees a little treat.
However, it is important that you understand the impact that gifts can have on tax so that you know how to spread festive cheer while staying tax compliant.
What are trivial benefits in kind?
For a benefit to be considered trivial, it has to be a small, non-cash gift or perk given to employees.
It is important that the gifts are given as a gesture of goodwill and are not directly linked to performance.
They also cannot serve to supplement or replace salaries and bonuses that the employee would otherwise be receiving.
This is important as it mirrors the way that gratuities and tips cannot replace salaries and bonuses as well – another vital consideration during the festive season.
Trivial benefits are not part of an employee’s contractual benefits and cannot be cash or anything cash equivalent, like a gift card.
These gifts need to be worth less than £50.
Directors can receive trivial benefits as well, but these cannot have a combined worth of more than £300 per tax year.
As you might imagine, the safest and most common gifts to give at this time of year are seasonal gifts like a hamper or wine, but can also include flowers or theatre tickets.
What are the tax liabilities of trivial gifting?
Provided you follow the rules set out by HMRC, the trivial benefits will be completely exempt from tax and National Insurance Contributions (NICs).
Due to them not carrying tax obligations, there is no need to report qualifying fits to HMRC or declare them on your P11D form.
However, you should keep an eye on the kinds of gifts you are giving, as if they do fail to meet the conditions, you will need to record them in the same way as other benefits and pay any necessary tax or NICS.
Given the steadily rising cost of living and the impact it has on the price of food and beverages, you will need to pay close attention to the prices of anything you are grabbing from the shop.
If you are paying tax on employee benefits through your payroll, filing P11D forms is not required.
However, you will still need to submit a P11D(b) to pay any Class 1A NICs due.
In the same way that you would probably want to keep a list of the gifts you are giving to employees to ensure that no one is left out, you can track trivial benefits to be certain that they do meet the criteria.
This will let you relax a little bit more during the otherwise chaotic festive period.
While we might not be able to fully take the stress out of the festive period, we can help you manage your tax planning and compliance for the year ahead.
