It may be early November, but now is an excellent time to start thinking about the gifts you might give this Christmas from your business.
In the UK, the taxman is surprisingly generous when it comes to businesses showing their appreciation to staff with gifts and festive celebrations. Employers are allowed to provide ‘trivial benefits’ to their employees without incurring tax liabilities – a win-win for all involved and a tax-efficient way to spread seasonal cheer.
What is a trivial benefit?
Trivial benefits are essentially small, non-cash gifts provided by employers to their employees. These gifts can range from a festive hamper, a bottle of wine, or a locally bought gift and typically given for special occasions, like Christmas. To qualify as a ‘trivial benefit’, the gift must meet the following criteria:
- The cost of providing the benefit must not exceed £50 per employee
- The benefit cannot be cash or a cash voucher
- The benefit must not be a reward for specific work or performance, it must be a genuine gesture of goodwill
Here are 5 reasons business owners should consider giving trivial benefits to their staff this Christmas:
- Employee Appreciation: Small, thoughtful gifts or gestures demonstrate appreciation and recognition, which can boost employee morale and job satisfaction.
- Motivation and Productivity: Trivial benefits can motivate employees, leading to increased productivity and commitment during the holiday season.
- Team Building: Holiday-related activities and group gifts can strengthen team cohesion and camaraderie among employees.
- Tax Savings: Trivial benefits are often exempt from additional tax liabilities, making them a cost-effective way to reward employees.
- Attracting and Retaining Talent: Offering these benefits can make the business more attractive to potential employees and help retain valuable talent in a competitive job market.
The tax advantage
One of the most significant advantages of trivial benefits is that they are tax-free for both employees and employers. This means that the employer does not have to pay National Insurance contributions on the value of the gift, and employees are not liable to pay income tax or National Insurance on the benefit received. It’s a small but impactful way for businesses to spread holiday cheer without incurring extra financial burdens.
Christmas parties and trivial benefits
Christmas parties are a long-standing tradition in the business world, and they are typically regarded as a way for employers to express gratitude to their employees. Under the trivial benefits rule, the cost of hosting an annual staff Christmas party or event is also exempt from tax, as long as the cost does not exceed £150 per employee. This means that companies can treat their employees to a memorable holiday celebration without worrying about tax implications.
Bear in mind that if partners are invited too, then you will need to consider the cost of both partners inside this figure. The £150 is an annual allowance so also consider whether you’ve held any other team celebrations during the year.
Examples of other trivial benefits:
- Small gifts – A gift basket, a box of chocolates, a bouquet of flowers, a bottle of wine or champagne, a scented candle
- Meal vouchers – Employers can give employees meal vouchers for a special occasion, like a festive meal or a team lunch
- Event tickets – Tickets to sporting events, concerts, or theatre performances, as long as they are occasional and not part of a regular remuneration package
- Gift cards – Gift cards or vouchers for a limited amount to be used at various retail stores or online shops
- Team building events – Occasional team building events or activities, such as a summer outing, or a company picnic
- Wellness benefits – Subscriptions to wellness services, such as gym memberships or yoga classes, as long as they are not provided regularly
Trivial benefits for directors – Don’t forget yourself!
As a director of a limited company, you can also give yourself a gift too. If you are a close company (where there are five or less shareholders) then there is a restriction of 6x £50 amounts throughout the year, or rather, £300 annually.
Conclusion
The holiday season is a time for spreading joy and showing appreciation, and the trivial benefits rule in the UK allows businesses to do just that without incurring additional tax liabilities. This arrangement not only benefits employees by enhancing their job satisfaction and financial well-being but also promotes goodwill and positive relationships between employers and their team. So, this Christmas, let the spirit of giving and gratitude flow freely, and make the most of the tax advantages offered by trivial benefits. It’s a gift that keeps on giving, long after the holiday season has passed.
About the author
Deborah Edwards
With over 20 years experience, Deborah is a Chartered Accountant and Harland Director. She is also a successful entrepreneur, finance director and our business transformation expert.
