If the value is substantial, such as a weekend retreat to celebrate 10 years in business, you could agree with HMRC to pay the tax on their behalf via a PAYE settlement agreement, but that’s admin we could all do without, so what can you do?

The answer could be lots of smaller gestures, via the Trivial Benefits exemption, but what does that mean?

In simple terms, the gift is exempt from the usual benefit-in-kind rules if it is trivial and not given as a reward for performance.

A benefit-in-kind is anything of monetary value you provide to your employees that is not ‘wholly, exclusively, and necessary’ for them to perform their contractual duties, such as a company car or health insurance, and these are taxed through payroll via form P11d.

Trivial

To be considered trivial and therefore exempt, it has to be (as the name suggests) of inconsequential value.

For employees, the current limit is £50 per day.  Directors have a £300 limit (in aggregate) for the tax year, so in other words they can only benefit from £50 store cards, six times per year.

Take care to ensure that the daily limit is not breached by a P&P charge.  If the hamper costs £49.99 + £4.99 delivery, the whole amount is a taxable benefit in kind.  Similarly, put a £50 Argos voucher in a “congratulations” card costing 99p and you’ve fallen foul of the daily limit!

Reward for performance

Any indication that the benefit/gift was related to the recipient’s role will be deemed a benefit in kind because it is remuneration for services.  So, take care with gifts for achieving sales targets or winning new work etc.

Ideas

Examples of trivial benefits could be a modest hamper, a bottle of wine or flowers for a birthday.  What you choose to gift your employee isn’t important from a tax perspective, so be as creative as you can as usually it is the sentiment that provides value to the recipient.

The gift must not be cash or a cash equivalent, such as vouchers.  Gift cards are eligible, provided they are unable to be exchanged for cash.

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