What is a trivial gift?

What is a trivial gift?

Christmas might be months away, but in everyday business, it’s quite common to give small gifts. You might want to mark a birthday, say goodbye to a colleague, or show appreciation after a tough week.  However, before adding the cost to your expenses, it’s worth pausing to check whether the gift qualifies as what HMRC refers to as a trivial benefit.

Trivial benefits are a specific category of employee benefit that is exempt from tax and National Insurance.  If a gift or gesture qualifies, you do not need to report it to HMRC.  However, not all small or thoughtful gifts automatically count, and the exemption only applies if certain conditions are met.

To be classed as a trivial benefit, all of the following must apply:

– It cost you £50 or less to provide, including VAT.
– It is not cash or a cash voucher.
– It is not a reward for work or performance.
– It is not something the employee is contractually entitled to.

If any one of these points is not met, the full value of the gift becomes taxable. There is no allowance for the first £50.  The exemption either applies or it does not.

It is worth noting that HMRC also says there is no official list of what counts as a trivial benefit. There is no set monetary limit below which all benefits are considered trivial by default. Instead, you are expected to apply some common sense and judgement.

HMRC does offer examples of typical trivial benefits, which can help clarify the boundaries.

For example, if you provide tea, coffee or drinking water in the workplace and it is available to everyone, it is exempt from tax.  Even if it does not qualify for a specific exemption, HMRC accepts that general refreshments of this kind are considered trivial.

Small seasonal gifts, such as a box of chocolates, a bottle of wine or a Christmas turkey, are usually fine too.  It does not matter if you have lots of staff and the total cost adds up.   If the gift to each employee is trivial, the exemption still applies.

You can also give a small gift to mark a personal event, such as flowers to celebrate a marriage or a new baby.  As long as the gift is not a reward for services or linked to the employee’s performance, it is likely to be covered by the trivial benefits rules.

Repairs to an employer-provided bicycle can also fall under the exemption, provided the repair is minor and costs £20 or less.  If a repair service is offered to several staff at once, HMRC will usually accept the benefit as trivial if it is clear that each repair is minor and the cost per person averages out to around £20 or less.

Seasonal flu jabs are another example of something that can be treated as a trivial benefit.  However, this does not extend to other forms of medical treatment or more specialist immunisations, such as vaccines for travel or pandemic flu.

What about Directors?

The rules are slightly different again for directors.  If you are the director of a ‘close company’ – that is, a limited company run by five or fewer shareholders – then you and your family members who are employees are subject to an annual cap.  You can receive multiple trivial benefits during the year, but the total value must not exceed £300.  Anything over that limit becomes taxable.

There is also an important point around salary sacrifice arrangements.  If you provide a benefit in exchange for a reduction in salary, it cannot be treated as trivial.  In these cases, you must report the benefit on a P11D form and calculate tax and National Insurance based on the higher of the salary given up or the cost of the benefit.  These rules have been in place since April 2017.

Although you do not need to report trivial benefits to HMRC, it is good practice to keep a record.  Make a simple note of what was given, when, who it went to and how much it cost.  This can help demonstrate that you are applying the rules correctly and gives you peace of mind in case of any future queries.

It is also worth remembering that gifts and rewards are not the same thing. 

Trivial benefits are small, occasional tokens given for personal reasons or goodwill.  A reward for performance, or anything connected to targets, bonuses or pay, is a different matter and will have tax implications.

If you are unsure whether something qualifies, it is best to ask.  We are always happy to talk through the rules and help you decide the most tax-efficient and appropriate way to recognise or thank your staff.  Sometimes a simple gesture goes a long way.  However, it is still worth verifying that the tax rules are in your favour.