What Are Trivial Benefits for Limited Companies?

All businesses, big and small, should offer employee benefits beyond the salary. Good employee benefits are crucial if you want to attract and retain talented and passionate staff. They’ll also help increase morale and productivity, while improving relationships between staff and management.

You can read our guide to the best employee benefits.

But an employee benefit doesn’t have to be something elaborate, like a cycle to work scheme or a private healthcare insurance package. While employees invariably value such benefits, a small token of appreciation now and then can also make a huge difference.

In this post we’ll explore trivial benefits, and explain why you should include them as part of your benefits package.

Trivial benefits are small gestures that boost staff morale

What Are Trivial Benefits?

You have to pay tax on most employee benefits. However, you do not need to pay tax or National Insurance on any benefits that meet certain criteria. Indeed, you don’t even have to tell HMRC about such benefits.

HMRC calls these benefits “trivial benefits”, and here’s the criteria a benefit must meet to be “trivial”:

  • It’s not a reward for work or performance.
  • The benefit is not in the terms of their contract, and it’s not related to their employment. So paying for a working lunch would not qualify as a trivial benefit.
  • The benefit cost you £50 or less to provide.
  • It’s neither cash nor a cash voucher.

Examples of Trivial Benefits

So what might count as a trivial benefit? Here are some examples:

  • Buying Christmas presents for each employee.
  • Taking employees out for a meal – but not as a reward for good work! That would class the meal as a standard benefit, which would mean you’d have to pay tax on it. But a meal to celebrate an employee’s birthday would count as a trivial benefit.
  • Buying an employee flowers (when they have a baby, for example).
  • Giving an employee a gift card (so long as they can’t exchange it for cash!)
  • Putting on a summer garden party for employees.

Remember, to remain “trivial”, you cannot pay more than £50 per employee for any of these benefits. So if you’re taking a group of employees our for a meal, your budget is £50 per head, rather than £50 for the whole bill.

If you pay more than £50 for the benefit, then you’ll have to pay tax on the whole amount – not just on anything in excess of £50.

How Many Trivial Benefits Can You Give Each Year?

Technically, you can give employees an unlimited amount of trivial benefits in a year. However, if you provide trivial benefits as part of a “salary sacrifice” arrangement, then they won’t be tax-exempt.

Also, if you’re the director of a “close” company – that is, a limited company run by five shareholders or fewer – then you cannot receive more than £300 worth of trivial benefits in a tax year.

You can read a full guide to the tax rules for trivial benefits on the HMRC website.

Why Your Business Should Offer Trivial Benefits

  • They’re great for morale. They show that you’re committed to making their working lives as pleasant as possible. Plus, as you cannot include trivial benefits as part of an employee’s contract, then in theory they’ll always come as a welcome surprise!
  • They’re great for recruitment. So you can’t talk about trivial benefits in a job description, as that might imply that they’re contractual, and thus, eligible for tax. But you can talk about birthday meals and summer BBQs on social media. And so can your employees! In short, if you’re kind to your employees, word will likely get out. This will make your business a more attractive place to work, which can help you stand out from your competitors.
  • They’re great for retention. As the name implies, trivial benefits are… well, trivial. They don’t have much value in themselves, and they’re no substitute for a good salary and a solid benefits package. But occasional tokens of appreciation, however small, can show your employees that you care. This can inspire loyalty. It can improve working relationships and even help to reduce staff turnover.

Further Support for Sole Directors and Employers

Insurance can provide essential protection against many of the problems that sole directors and employers face, from unpaid invoices to tax disputes. At Tapoly, we specialise in flexible and affordable insurance so you don’t have to splash out for year-long cover if you only need it for a short time. We have policies for freelancers and contractors as well as small business insurance to cover all your needs, with cover starting from just 35p a day.

If you have any questions or would like to discuss your options, please contact the Tapoly team at info@tapoly.com, call our helpline on +44(0)2078 460 108 or try our chat on our website.

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