The ultimate guide to the trivial tax benefit scheme

If you’re interested in rewarding your employees, tax free, you’re in the right place as we have the ultimate guide to the trivial benefit scheme. From how it works to the kind of benefits you can offer as part of the scheme, when you can use it and limitations to be aware of, read on to find out more.

What is the trivial tax benefit scheme?

Many employee benefits are known as benefits in kind and include the likes of private healthcare or a company car. Benefits in kind have to be declared to HMRC with both tax and national insurance payable. Then there are other company benefits such as smaller ‘trivial’ employee gifts and that’s where the UK Government’s trivial tax benefit scheme comes in. The trivial benefit scheme allows organisations to gift staff a non-cash reward of up to £50 multiple times throughout the year, free of income tax and national insurance, and without the need to declare the trivial benefits to HMRC.

How does the trivial benefit scheme work?

There are a few trivial benefit rules you need to be aware of if you’re planning to use the trivial tax benefit. The first is that it costs you less than £50 to provide, the second is that it isn’t offered as a cash payment, or as a cash voucher. It also can’t be a reward for an employee’s work or performance, and it can’t form part of the employee’s contract or regular salary. As long as these four conditions are met, it can be classed as a trivial benefit.

What kind of trivial benefits can I offer?

There are many trivial benefit options for employers. Common trivial benefits examples include small gifts like wine or chocolates to say ‘happy birthday’, seasonal gifts like an Easter egg or Christmas turkey. Increasingly though, and to cater for varying employee needs, organisations often opt for a gift voucher or a Gift Card as a trivial benefit, allowing employees choice and flexibility. Town & City Gift Cards are eligible to be used as part of the trivial benefits exemption scheme – these local Gift Cards are available for towns and cities right across the UK and can be spent with the big brands they know and the local businesses they love, ideal for offering employees a trivial benefit teamed with choice.

Is the trivial tax benefit scheme better than cash for employees?

There are many reasons to use the trivial benefit scheme, with the main one being the fact that the benefit is exempt from tax and national insurance contributions, but there are other benefits too. If you gift staff £50 cash in their pay, not only will it be taxed, it gets lumped into the same pot as their regular pay and lost among the debits and credits, so the employee never really feels the benefit of it. A tangible trivial benefit on the other hand, say a physical or even a digital Gift Card, is separate from their pay and can feel like more of a gift they can enjoy.

When would I offer a trivial benefit?

As the trivial benefit scheme can’t be linked to an employee’s performance, it’s useful to think about other reasons to use this initiative. Ideas could be to celebrate an employee’s birthday or work anniversary, surprise and delight initiatives, seasonal celebrations such as Easter, Christmas or the summer, organisation milestones such as birthdays, or to show your support for local businesses. Town & City Gift Card research found that 56% of employees said an unexpected reward from their workplace would motivate them more than an expected reward, so factoring in unexpected trivial benefits throughout the year can be a huge boost to staff motivation levels.

Can I use the trivial benefits allowance for group occasions?

As we know, the trivial tax exemption is £50 per gift, and can be given to employees multiple times each year as an individual benefit. You can also use the trivial benefit to give a gift to a group of employees, such as a meal to celebrate a birthday or company milestone. If it’s not practical to work out exactly what you spent on each employee during an event like this, it may be possible to work out the average cost per person. Check that the total value is under £50 per person and it meets the other stipulations of being non-cash, not a reward for performance, and isn’t part of the employee’s regular contract or salary. To make things simpler, you could gift department managers a £50 Town & City Gift Card per employee to treat their team to a meal out, with a fixed price menu per head.

Can directors receive trivial benefits?

Directors of close companies (a limited company that’s run by 5 or less shareholders) can’t receive benefits of more than £300 in a single tax year.

What about salary sacrifice arrangements?

Another thing to be aware of with the trivial tax benefit is that if you provide trivial benefits as part of a salary sacrifice arrangement they become a taxable benefit. You’ll need to complete a P11D form either for the salary given up or how much you paid for the trivial benefit – whichever is higher. These rules do not apply to salary sacrifice arrangements made pre 6 April 2017 though.