Limitations of trivial benefit claims

Topic: Limitations of trivial benefit claims

Under HMRC’s rules, there is no tax to pay on trivial benefits in kind (BiK) provided to employees where all of the following apply:

• the benefit is not cash or a cash-voucher; and
• costs £50 or less; and
• is not provided as part of a salary sacrifice or other contractual arrangement; and
• is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The tax-free exemption applies to small non-cash benefits like a bottle of wine or a bouquet of flowers given occasionally to employees, or any other BiK classed as ‘trivial’ that falls within the exemption. The rules provide an excellent opportunity to give small rewards and incentives to employees without any further tax implications.

However, there are limits to the definition: a trivial benefit. For example, gifts that are provided as a reward for services performed or as part of the employees’ duties do not qualify for the exemption. However, small gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill will usually qualify.

There is also £300 annual cap each tax year for directors or other office-holders of close companies and their families.

A close company is a limited company that’s run by 5 or fewer shareholders.

The £50 limit remains for each gift but there is an overall cap of £300 for non-cash benefits to be withdrawn per person per year. The £300 cap does not apply to employees. If the £50 limit is exceeded for any gift, the total value of the benefit will be taxable.

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