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If you’re running a limited company in the UK, there’s a tax-efficient way to treat yourself or your employees to small perks — known as trivial benefits. These are minor, non-cash gifts, like a bunch of flowers or a box of chocolates, that don’t trigger tax or National Insurance and don’t need to be reported to HMRC, as they aren’t included in the terms of their contract, which means they are not considered taxable benefits.
This guide explains everything UK limited company directors and small business owners need to know about trivial benefits, including the £300 director allowance, qualifying rules, and real-life examples.
Trivial Benefits Definition
Trivial benefits are small, tax-free perks employers can give to employees. To qualify, the benefit must cost £50 or less, not be cash or a cash voucher, and must not be a reward for work or performance. Common examples include gift cards, birthday presents, or staff meals. These benefits are exempt from tax and National Insurance if they meet the criteria.
What Counts as a Trivial Benefit?
Trivial benefits are small token gifts or perks a company can offer without creating a tax liability on employment income under Section 323A ITEPA 2003 — but only if all of the following conditions are met:
- The cost does not exceed £50, including VAT.
- It must not be cash or something that can be converted into cash.
- It must not be a reward for doing work.
- It must not be something the employee or director is contractually entitled to.
HMRC has established stringent trivial benefit rules. If even one of these conditions isn’t met, the benefit doesn’t qualify and may be taxed.
When all these criteria are met, the benefit is considered trivial. That means:
- You don’t need to inform HMRC.
- It doesn’t count as taxable income.
- There’s no Class 1 National Insurance contribution due.
- It doesn’t need to be reported on P11D or P11D(b) forms.
Examples of Trivial Benefits
Here are some common examples of trivial benefits that would usually qualify:
- Treating employees to a meal to celebrate a birthday
- Providing Christmas presents to each employee
- Offering flowers to celebrate the birth of a baby
- Buying a non-cash gift card for an anniversary
Important: The £50 limit applies per benefit, not per year. If each individual follows the rules, you can give multiple trivial benefits throughout the year.
Also Important: If the benefit cost exceeds £50, the entire amount becomes taxable, not just the excess. If it’s difficult to pinpoint the cost per individual for group events, HMRC allows you to calculate the average per head.
Different rules apply to annual events such as summer or Christmas parties. You may claim up to £150 per employee, including a plus one. See our separate article for complete details.
Special Rules for Directors of Close Companies
Most small UK limited companies are considered close companies — companies controlled by five or fewer shareholders.
If you're a director of a close company, you're subject to a £300 annual cap for trivial benefits. Each gift must still cost £50 or less and meet the usual criteria.
Example:
- Birthday gift: £40
- Christmas voucher: £50
- Thank-you flowers: £30
- Anniversary gift: £40
- Summer event voucher: £50
Total: £210 — leaving £90 before hitting the £300 cap. If you go over the annual cap, the excess becomes taxable.
When a Trivial Benefit Doesn’t Qualify
Certain benefits don’t qualify for the exemption. These include:
- Rewards for performance
- Benefits promised in a contract or agreement
- Cash or vouchers exchangeable for cash
- Providing lunch related to work
- Team-building or work-related events
- Taxis for employees working late
A notable point from HMRC guidance: gift cards are treated cumulatively. The trivial benefit exemption is lost if you top up the same card multiple times during the year and exceed £50 in total.
To avoid this, give separate cards each time, ideally with different types of gifts, to show they are independent.
Comparison Table: Employees vs Directors
Regarding trivial benefits, the rules differ slightly for employees and directors of close companies. Here's a simple table summarising those differences:
While all employees can receive trivial benefits, directors of close companies have an annual limit. This highlights the importance of understanding your company structure and the specific rules that apply to you.
Do You Need to Report Trivial Benefits to HMRC?
If a benefit qualifies, you don’t need to report it to HMRC. There’s:
- No income tax
- No National Insurance
- No P11D reporting
Still, keeping clear records is wise, especially if you're a director tracking your £300 annual allowance.
Why It’s Worth Using Trivial Benefits
These small perks are a great way to:
- Show appreciation
- Boost morale
- Add a personal touch
- Stay within HMRC rules
When used correctly, they’re simple to implement and don’t add to your admin workload.
Final Thoughts
Trivial benefits can be great for company directors to show they care about their employees. They come with tax benefits and help improve the company culture to be suitable for everyone. Companies that follow HMRC rules and keep good records can use trivial benefits to build a happier and more motivated team.
Additional Examples from HMRC
Example A—Qualifying Trivial Benefit: An employer gives each employee a bottle of wine worth £25 as a Christmas gift. Some employees who don’t drink are given a £25 supermarket gift voucher instead. When considering the situation of a group of employees, both the wine and non-cash vouchers qualify as trivial benefits, which are often seen as having little actual value.
Example B—Non-Qualifying Trivial Benefit: An employer gives 25 employees a bottle of wine at a Christmas party. Twenty bottles cost £15 each, and five directors receive bottles costing £140 each. Only the £15 bottles qualify—the £140 bottles exceed the £50 limit and are taxable.
Need Help with Directors Trivial Benefits?
If you need assistance with trivial benefits, seek guidance from a certified limited company accountant to navigate the rules and regulations.
FAQs on Trivial Benefits
1. Can you claim VAT on trivial benefits?
You cannot claim VAT on small benefits. These benefits are seen as business costs, so you cannot recover VAT.
2. Can limited companies provide trivial benefits to employees?
Yes, limited companies can offer small benefits to their employees. They just need to follow HMRC's rules about the cost, type, and frequency of these benefits.
3. Can gift cards be used as trivial benefits?
Yes, you can use gift cards as small benefits. Just ensure they can't be exchanged for cash and their value does not exceed £50.
4. How can a limited company stay compliant?
A limited company can follow HMRC rules about small benefits and salary sacrifice arrangements by keeping precise records. This means noting down the date, value, person who received it, and the reason for the benefit, especially for any arrangements made after 6 April.
5. How often can trivial benefits be offered?
You can give small gifts or benefits as often as you want. Just remember to keep them occasional and not too familiar. If you give them too much, it might cause some questions from HMRC.
6. Are there any limits on the value of a trivial benefit?
The value of a trivial benefit cannot go over £50 for each employee at an event. If you are a director of a close company, there is an extra yearly limit of £300.
Book a free consultation to discuss trivial benefits.
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