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Tax on trivial benefits

7 September 2023

Benefit-in-kind (BiK) trivial exemption allows tax-efficient gifting of small non-cash rewards to employees, provided they're not for services performed or part of duties. No PAYE or P11D required, and Class 1A NI contributions are exempt. Directors of close companies have an annual cap of £300.

Simplifying Employee Rewards with Trivial BiK Exemption

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 given occasionally to employees, or any other BiK classed as ‘trivial’ that falls within the exemption. Through the exemption employers can simplify use BiKs whilst offering a tax efficient way to give small gifts to employees.

The trivial benefit rules provide a great opportunity to provide small rewards as an incentive to employees. The main caveat being that 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 like the birth of a child, marriage or other goodwill gestures would qualify.

The employer also benefits as the trivial benefits do not 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
  • is not provided in recognition of services performed as part of employment, or in anticipation of such services.

Eligibility and Annual Cap for Directors and Office-Holders

The rules also allow directors or other office-holders of close companies and their families to benefit from this relief but with an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year.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.

For more information, click here.

Source: HM Revenue & Customs Tue, 05 Sep 2023 00:00:00 +0100

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