What is a trivial benefit?
A trivial benefit is a tax efficient way for employers to engage and reward its team.
When employers offer employees a trivial benefit it does not need to be declared to HMRC and therefore becomes exempt from having tax and National Insurance added to it.
The benefit is described as ‘trivial’ because it should have little actual value. Typically they’ll be small token gifts such as a box of chocolates, a gift voucher for the employee’s favourite retailer, a bunch of flowers to celebrate a birthday, or a seasonal gift such as a Christmas pudding for the big day.
There is no limit on the number of trivial benefits an employer can give to its employees or directors, but there are stipulations that the benefit must meet in order to be classified as trivial.
Let's look at the criteria of a trivial benefit.
What is classed as a trivial benefit?
Everyone will have a different idea about what is classed as a trivial benefit gift. The term ‘small gift’ is open to interpretation and the line between what is and isn’t a taxable benefit could become blurred.
This is why in April 2016 HMRC introduced legislation to provide clarity as to what small benefits are deemed to be trivial, and therefore exempt from tax and reporting obligations.
Here are the conditions:
- The trivial benefit must not exceed £50 for each employee.
- The trivial benefit isn’t cash or a cash voucher.
- The trivial benefit is not given to an employee as a reward for their work or performance.
- The trivial benefit isn’t included in the terms of their employment contract.
How many trivial benefits can you give in one year?
Providing each benefit does not exceed £50, an employer can gift an employee with multiple trivial benefits throughout the year. However, in cases where the employer is a close company (a limited company with five or fewer 'participators', or a limited company of which all the 'participators' are also directors) the exemption is capped.
In those instances, the trivial benefits must not exceed a total cost of £300 in the tax year.
What is the average cost per person for a trivial benefit?
The rules of trivial benefits can be quite complex because in cases whereby a team, or a group of employees, are being provided with something, the cost of that could be calculated as an average cost per person.
Typically, in most cases, it will be very clear whether it is possible to calculate the actual cost per person or whether it is necessary to use an average cost per person.
HMRC advises that businesses take a common-sense approach to trivial benefit rules, when buying a trivial benefit for a group of employees, although they provide examples of where an average cost valuation would be acceptable in their guidance.
If we take the example of a meal out for seven employees where the total bill comes to £335. In this situation, HMRC would accept an average cost of approximately £48 per person, meaning the benefit would be classed as trivial.
HMRC wouldn’t expect a company to analyse the bill and work out the actual cost for each employee. However, if at Christmas, employees are presented with a bottle of wine and a gift voucher with an exact cost of £45 and directors are provided with a bottle of champagne costing £70, the actual costs would be used.
The bottle of wine and gift voucher for each employee would be exempt from tax and NI because it doesn’t exceed £50. However, the directors’ benefit would be taxed on because the full cost of the champagne exceeds the limit.
The advantages of offering trivial benefits
Despite the name, this type of employee benefit is far from trivial. Employee benefits, regardless of their size, are never trivial. They are essential in a modern day workplace as a way of engaging with a workforce, particularly following a very difficult period of time where lots of employees have had to work remotely and at risk of becoming very isolated from their colleagues and employer during the pandemic.
A benefit, no matter how trivial, can go a long way in boosting morale, fostering relations with a staff member and ensuring employees feel valued and appreciated.
The way to view trivial benefits is that they're not intended to add any financial value to an employee's pay. Nor can they be given in lieu of payment. They're trivial because they have little actual value, but receiving a gift voucher for your favourite shop could add a lot of value for the recipient!
When should employers use trivial benefits?
After years of remote working, isolating, juggling homeschool and learning to live with a pandemic, who wouldn’t want a little gift to enjoy?
While this is true, the notion of trivial benefits goes a little deeper.
They show that you work for an employer who cares about its people, who makes employees feel valued, cared for and appreciated. In fact, research shows almost half of employees believe their value at a company is reflected by the gifts they receive.
And especially now employees are facing a rise in the cost of living, a gift voucher for the local supermarket could make the world of difference to a person’s outgoings for the month, and in turn, their motivation and loyalty to their employer only becomes greater.
Why would an employer want to give out trivial benefits?
An employer should choose to provide trivial benefits to avoid becoming a company that neglects to look after its people, both socially and emotionally.
The Chartered Management Institute (CMI) recently polled over 2,000 senior leaders, managers and employees to understand their experience of managing during the pandemic. The research found organisations that had fostered a sense of belonging and made efforts to bring people together during the crisis said that their culture had benefited as a result.
Companies that engage with their employees can benefit in many ways:
- it shows their employees they care and want to listen
- they will build a better connected and engaged workforce
- helps to boost the productivity
- reduces staff turnover because employees are motivated and loyal
Company benefits can only ever return positivity for an employer, but the biggest advantage to any benefit that’s offered, no matter how trivial, is that it creates and drives a happy workforce.
Trivial benefit ideas
Now you know all about trivial benefits, here are some gift ideas that you could give your employees to ensure they know you value everything they do:
- A birthday meal out with colleagues.
- Send flowers to celebrate a new baby.
- Refreshments for employees working long hours.
- A gift voucher to celebrate an anniversary, or other special occasion.
- Buying each employee a seasonal gift for Easter, Christmas etc.
- Hosting a party for employees.
- Housewarming gift, such as a gift card for M&S or John Lewis
- New job and farewell gifts.
- Purchasing new work attire ahead of new business pitches or events.
- Bank holiday treats.
- Friday pizzas!
More of your trivial benefit FAQs
Is a gift card a trivial benefit?
Yes, a gift card is a trivial benefit as long as it isn’t a cash voucher and it isn’t being given to the employee as a reward for performance or for a particular piece of work they’ve completed.
An example of a cash voucher is a prepaid Mastercard or similar. This will be deemed as cash and void the conditions of a trivial benefit and therefore, it will be taxable.
Lots of businesses will gift staff with vouchers for occasions such as a birthday, Easter, Christmas, wedding or anniversary.
Can a meal be a trivial benefit?
Yes, a meal can be a trivial benefit as long as it isn’t being given in recognition of their work and the average cost per person is £50 or less.
Are trivial benefits tax deductible?
A trivial benefit only becomes a taxable benefit when it exceeds £50 per person. It does not need to be declared to HMRC if it is below that. If it is a selection of gifts that in total amount to over £50, they could be gifted individually, as separate benefits, and as long as each item remains £50, or less, it will be tax-free.
For more information on trivial benefit rules visit www.gov.uk.
If you’d like support fulfilling your company's trivial benefits, get in touch with our benefits team via the contact form or calling 0203 948 8143.