Will your festive spirits be dampened by tax liabilities? How trivial benefits impact your business

The festive season is rapidly approaching and it is natural to want to treat your employees.

Unfortunately, even small gifts can have implications for your tax and National Insurance Contributions (NICs), so you should understand the implications of any kind gestures.

We are no Scrooge as we want to help you understand how to spread festive cheer while staying tax-efficient.

What are trivial benefits in kind?

Trivial benefits are small, non-cash gifts or perks given to employees.

In order for benefits to qualify as trivial, they must meet the specific requirements from HMRC.

The gift must:

• Cost £50 or less
• Not be cash or a cash equivalent (like gift cards exchangeable for cash)
• Not be a reward for work or performance
• Not be part of an employee’s contractual benefits
• Not replace salary or bonuses

The most common examples of trivial benefits include seasonal gifts like a hamper or wine but can also include flowers or theatre tickets.

Directors can also receive trivial benefits, but these cannot have a combined worth of more than £300 per tax year.

What are the tax liabilities of trivial gifting?

Trivial benefits tend to be extremely tax-efficient as, if they meet the HMRC requirements, they are completely exempt from tax and NICs.

There is currently no need to report qualifying gifts to HMRC and they do not need to be listed on your P11D form.

It is important to declare any gift that does not fall within the criteria, as this will need to be recorded in the same way as other benefits and you will need to pay any tax or NICs owed.

If you are paying tax on employee benefits through your payroll, filing P11D forms is not required.

However, you will still need to submit a P11D(b) to pay any Class 1A NICs due.

You should track your trivial benefits to ensure that they meet the criteria and you remain compliant.

We can help you manage your obligations so your festive cheer does not turn sour.

To incorporate tax-efficient gifting into your business strategy, please get in touch with our team.