In April 2016, legislation was introduced to UK businesses in order to help simplify the way that smaller employee benefits are managed and administered.
There are countless businesses that have never given a second thought to the tax implications of a staff night out, Christmas presents or even a congratulatory bunch of flowers. Previously, these benefits had to be entered into a P11D at the end of the tax year, and keeping on top of multiple gifts/benefits can be a real headache for HR and your accounts team.
Also, it does tend to kill the moment of altruism if a string of tax forms need to be filled out by both parties in amongst the well wishes of a new family addition or promotion!
Fortunately, common sense has prevailed and HMRC has now introduced guidelines to help businesses avoid unnecessary paperwork as a result of these ‘trivial benefits’.
Read on to learn more about exactly what trivial benefits are and how they can help your business to simplify tax reporting.
What Counts As A Trivial Benefit?
So let’s start at the beginning – what exactly is a trivial benefit? A trivial benefit is effectively a gift which is bestowed unto your employees outside of work-related performances and contracted bonus schemes.
To be considered a trivial benefit, the reward cannot be:
- Cash or a cash voucher
- A reward for good performance or recognition
- Formally stated within an employee contract
Remember, there’s also a £50 limit per employee that can be spent on each trivial benefit with a maximum cap of £300 per year.
If for any reason you exceed this limit then the entire amount, not just the excess, will be taxed so it’s well worth making time to create budgets that won’t bypass the £50 or £300 limit.
HMRC understand that it’s nigh on impossible for businesses to calculate the exact amount that has been spent on each employee, particularly for staff nights out meals. For this reason, they’re more than happy to accept an average spend on each employee.
Trying to monitor the individual spending on 50 employers across the Christmas period can be incredibly time-consuming, especially when the bills tend to be settled in one group payments. Instead, if you have 50 employees and the total cost of the night outcomes to £2,000, each employee could be attributed to an average of £40 rather than one at £68, one at £30 etc.
Some of the most common examples of trivial benefits include, but are not limited to:
- Buying birthday or Christmas presents for staff
- Token gestures such as a bunch of flowers to celebrate an anniversary or birth
- Taking staff out for a meal to celebrate a special occasion
- A fun day or summer party for employees
There are obviously countless scenarios that could appear under these definitions but this will at least help to give you a benchmark as to what is and isn’t acceptable under trivial benefits.
How Do I Manage Trivial Benefits In My Business?
Just because you don’t need to include trivial benefits in your annual year reporting doesn’t mean that you can just buy gifts for staff and leave completed undocumented.
No matter what the industry or sector that you operate in, there will always be the possibility that HMRC may want to conduct an employer compliance review. As part of this, they’ll want to see that any gifts or benefits you’ve offered to employees under this scheme have been done so in line with current tax and national insurance guidelines.
Why Use Gorilla Accounting?
At Gorilla Accounting, we work with businesses of all sizes to help them understand how trivial benefits can affect your taxes and cash flow.
As part of your Gorilla Accounting subscription, you’ll have free, unlimited access to the online accountancy software, FreeAgent. This invaluable piece of online software allows you to upload receipts as they’re generated, meaning that those flowers, bottles of wine or staff meals can be instantly accounted for against your tax allowance. This will help you to ensure that you don’t exceed the £300 annual limits for staff which are exempt under the trivial benefits guidelines.
You’ll also be assigned a dedicated personal accountant who will work with you to understand your business and help you to overcome any trivial benefits issues as they arise. You’ll have a direct dial telephone number and e-mail address for urgent queries as well as having the freedom to arrange video conference calls and face to face meetings.
What’s more is that our Client Service Guarantee ensures that all enquiries received before 3pm will always receive a response on the very same day. Even if we’re unable to solve your situation immediately, we’ll liaise with you to advise on turnaround times and always keep you in the loop.
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