Fifty quid, that’s the answer, according to HMRC at least.
For an awfully long time, it’s been accepted by HMRC that if an employer provided a “trivial” benefit to an employee or director, the recipient didn’t need to pay tax in return for the privilege. That’s why you don’t pay tax as a result of your employer providing free tea and coffee in the office. HMRC accepted that was trivial.
Exactly where the line between trivial and non-trivial stood wasn’t stated, it was just left to everyone’s judgement and common sense. If someone had asked us if giving an employee something worth £40 was trivial, we’d probably have said no, depending upon context.
But now it’s been made explicit. Under £50 is trivial, which is higher than anyone reasonably would have expected. So the answer now if we’re asked if a gift worth £40 to employee is trivial, is – yes, it is, and the employee doesn’t have to pay tax.
This is very helpful. Lots of employers provide, say, drinks after work from time to time. Last year, we’d have said that there was a theoretical risk of an enthusiastic tax inspector totting the year’s drinks up and trying to tax each employee on their share. Not any more (unless you’re handing out some very expensive drinks) – it’s quite safe to put some money behind the bar and not worry about staff getting a tax bill down the line.
There are a few caveats, as you’d expect, but they don’t stop the new interpretation being helpful. First, a director can only benefit up to a maximum of £300 of trivial benefits a year. Fair enough. Second, the trivial benefit can’t be cash, or a gift voucher that can be exchanged for goods (though an “experience” voucher is fine). Third, it only applies to benefits that are non-contractual, so you can’t promise the benefits to anyone, and if you took everyone to the pub every week, HMRC would be able to argue that it had become implicitly contractual.
But those warnings notwithstanding, this is still pretty helpful news!
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