Trivial benefits claim: HMRC reminder

posted on September 17, 2019in the Blog Category

Trivial benefits claim: HMRC reminder

A recent HMRC webinar caused confusion when the presenter claimed that the provision of regular bacon rolls for staff could not be classified as tax-free trivial benefits but implied that gifts of wine could be tax-free.

The presenter was reported to have said that the cost of the weekly bacon rolls would have to be aggregated over the entire tax year and if the total cost exceeded £50 the sarnies would be taxable.  The cost of gifts provided to staff do not have to be aggregated over the tax year to check if those items can be classified as trivial benefits unless HMRC consider them to be a benefit.  The £50 limit is per gift not per year and unlimited numbers of items can be provided per staff member as tax-free trivial benefits in any year.

There is an annual limit of £300 for trivial benefits provided to directors of close companies.  For a gift to be a trivial benefit all four of these conditions must be met:

  • the cost of providing the benefit does not exceed £50;
  • the benefit is neither cash nor a cash voucher;
  • the employee is not entitled to the benefit as part of any contractual obligation; and
  • the benefit is not provided in recognition of services performed by the employee as part of their employment duties.

Say the employer promises to provide bacon rolls to those employees who turn up to help with a stocktake every Friday morning; this is part of the employees’ duties and the hot sandwich constitutes a reward for performing those duties so the last condition is broken.

If the employer promises to provide bacon butties or perhaps a bottle of wine as an unexpected treat to employees it can be classified as a trivial benefit as the employees do not have to do anything in order to receive the treat.

Where trivial benefits are provided to a director or an officer of a close company or to a member of the director’s family or household there is an annual cap of £300 on the value of items which can be treated as trivial benefits.  The same four conditions must also apply to those trivial benefits for directors, including that the gifts must not be made as a reward for services.

This could make it difficult for a one-person company to use the trivial benefit rule to extract £300 worth of value as say wine per year from their company without it being a reward for services.

AvatarWritten By: Mandi Mottershead

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