Home 5 Employee Benefits 5 Reminder of not-so-trivial tax-free benefits

Reminder of not-so-trivial tax-free benefits

9 November 2023

BiK trivial exemption allows tax-efficient non-cash gifts under £50 to employees, simplifying processes for employers, with exemptions from PAYE, P11D, and Class 1A NI. Directors have a £300 annual cap; exceeding £50 incurs tax consequences.

Maximizing Benefits: Employers’ Advantage

There is a benefit-in-kind (BiK) trivial exemption that applies to small non-cash benefits like a bottle of wine, or a bouquet of flowers. It is given occasionally to employees or any other BiK classed as ‘trivial’ that falls within the exemption. By taking advantage of the exemption employers can simplify the treatment of BiKs. This can be done whilst at the same time offering a tax efficient way to give small gifts to employees.

The trivial benefit rules provide a great opportunity to give small rewards and incentives to employees. That is as long as the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

Employee Rewards: Navigating Exemptions and Limits

The employer benefits because trivial benefits don’t have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions.

The tax exemption applies to trivial BiKs where the BiK:

  • 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
  • isn’t provided in recognition of services performed by the employee as part of their employment, or in anticipation of services.

The rules also allow directors or other office-holders of close companies and their families to benefit from these gifts but with an annual cap of £300. The £50 limit remains for each gift subject to the £300 of non-cash benefits to be withdrawn per person per year.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 value of the benefit will be taxable.

Source: HM Revenue & Customs Tue, 07 Nov 2023 00:00:00 +0100

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