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Trivial Benefits – gifting employees

23rd October 2019

As we approach the festive season, Christmas is a time that many employers like to give gifts to their employees as a thank you. However, these small gifts if not careful can generate a tax bill.

A few years ago HMRC introduced the trivial benefits exemption in order to remove the tax reporting obligations on these small gifts. However, there are a number of conditions that need to be met.

The gift made by the employer to the employee cannot cost them more than £50 at a time. This means multiple gifts can be made at different time of the year but the cost of each gift cannot exceed £50. However, gifts made to directors (or their family) in this manner are usually capped at £300 a year in total.

Any gifts made to employees cannot be in the form of cash or a cash voucher otherwise they will be taxable. If you are thinking of providing vouchers, care needs to be taken because if the receiver can redeem the vouchers for cash, that in HMRC’s eyes is a cash benefit and will not be covered by the exemption.

The other important thing to note is that the gift cannot be part of a salary sacrifice arrangement. Also the gift cannot be awarded to the employee as a reward for services undertaken, it must be completely unconnected with their duties.

You can’t receive trivial benefits worth more than £300 in a tax year if you’re the director of a ‘close’ company. A close company is a limited company that’s run by 5 or fewer shareholders.

If you are thinking of awarding trivial benefits to your staff and you wish to discuss any potential tax implication please contact us . We have a wealth of advice and information on this and all aspects of personal tax and business tax planning. 

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