What Are Trivial Benefits?

In simple terms, trivial benefits are small perks or gifts that employers can give their employees that aren’t subject to income tax or National Insurance. These can be a great way to show appreciation and improve employee morale without adding to your payroll expenses. Examples include small holiday gifts, birthday treats, or occasional lunches on the company.

However, there are conditions that must be met to qualify as a trivial benefit:

1. Cost Per Benefit: Each trivial benefit must cost £50 or less.
2. Not Cash or Cash Vouchers: The benefit cannot be in the form of cash or cash vouchers (although gift cards can be acceptable if they’re non-cash and meet the other criteria).
3. No Obligation or Contractual Requirement: The benefit must not be a reward for work or performance, nor should it be part of a contractual obligation.
4. Personal, Not Work-Related: The benefit should be given for personal occasions or reasons, not related to the employee’s work performance.

When these criteria are met, the trivial benefit can be given without incurring tax or National Insurance implications.

How Small Businesses Can Use Trivial Benefits

Small businesses often have limited budgets for employee rewards, so trivial benefits are an excellent way to show appreciation in a cost-effective manner. Here are some ideas on how to use them effectively:

• Celebrating Special Occasions: Birthdays, work anniversaries, or special achievements are perfect opportunities for trivial benefits. Small gifts like a bottle of wine, a box of chocolates, or a gift card to a local café can make employees feel appreciated.
• Holiday Treats: Small holiday gifts around Christmas, Easter, or other festive seasons are also great examples. Many companies gift employees a small token of appreciation around the holidays, which can build team morale without creating tax liabilities.
• Occasional Lunches: An occasional team lunch or snack outing, as long as the cost per person remains under £50, can be considered a trivial benefit. This can serve as an excellent team-building activity and give your employees a nice break during the day.
• Gift Cards for Personal Use: Non-cash gift cards to popular stores or online shops (within the £50 limit) make for flexible, appreciated benefits.

What Is Not Included in Trivial Benefits?

While trivial benefits offer flexibility, there are specific restrictions. Here’s what doesn’t qualify as a trivial benefit:

Cash or Cash Equivalents: You can’t give cash bonuses or cash vouchers as a trivial benefit, as they are considered part of taxable income. However, non-cash gift cards (like a store gift card) are acceptable if they meet other criteria.

Work-Related Expenses or Bonuses: Benefits that reward an employee’s performance, such as bonuses, or that are provided for work purposes (such as equipment or training expenses) cannot be counted as trivial benefits.

Benefits Exceeding £50: If a gift or benefit exceeds the £50 limit, even by a penny, it no longer qualifies as a trivial benefit and will be subject to taxes and National Insurance.

Frequent Recurrences for the Same Person: While there is no set limit on the number of trivial benefits for employees in general, offering the same benefit repeatedly to the same employee may raise questions. For directors or office holders of a close company, there is a £300 annual cap on trivial benefits they can receive.

What to Watch Out for When Providing Trivial Benefits

When using trivial benefits as part of your employee rewards strategy, keep these key considerations in mind:

• Cost Monitoring: Ensure that each benefit stays within the £50 limit. Even a small miscalculation can turn the benefit into a taxable item. It’s a good idea to keep clear records and receipts for each benefit provided.
• Avoiding Contracts or Obligations: Don’t make trivial benefits part of any contract or performance-based rewards. Once an employee feels entitled to the benefit, it no longer qualifies as a trivial benefit, as it could be considered an obligation.
• Tracking Benefits for Directors: For directors and their families in close companies, the total annual amount of trivial benefits is capped at £300. Tracking this cap ensures you stay compliant and avoid unexpected tax liabilities.
• Staying Flexible: Since trivial benefits are meant for occasional use, keep them varied and unexpected. This preserves the element of surprise and ensures that benefits aren’t seen as regular entitlements.

Festive Ideas for Trivial Benefits at Christmas

Here are some creative ways small businesses can use trivial benefits at Christmas to spread holiday cheer:

• Christmas Hampers or Gift Baskets
  A small Christmas hamper filled with holiday treats, snacks, or beverages makes a memorable and thoughtful gift. As long as the total cost of each hamper is £50 or less, it can qualify as a trivial benefit. Employees will appreciate the festive thought and feel recognized.
• Gift Cards for Holiday Shopping
  Non-cash gift cards to popular retail stores or online shops are practical and appreciated during the holiday season. These allow employees to choose something they really want, adding a personalized touch. Just ensure the gift card remains under the £50 limit.
• Holiday Lunch or Coffee Treats
  Treating your team to a holiday lunch, coffee outing, or even a hot chocolate day in the office can be a great way to bring everyone together. As long as the cost per person stays within the limit, this can be a fun way to celebrate without triggering extra tax.
• Festive Goodies
  Seasonal treats like a bottle of wine, a box of chocolates, or festive baked goods are small gifts that can go a long way. Employees enjoy receiving these personal gestures, and it adds to the holiday spirit in the workplace.
• Decorating Essentials or Desk Treats
  Consider small holiday decorations, desk plants, or even festive candles to brighten up the workspace. These little extras keep the office looking merry and can serve as a nice holiday perk for employees.

Can I use trivial benefit when it comes to Christmas parties?

When it comes to Christmas parties or dinners, it’s important to note that these events do not fall under the trivial benefits exemption but instead are covered by a separate annual exemption for staff entertaining. This exemption allows businesses to spend up to £150 per person per tax year (including VAT) on events such as Christmas parties or dinners without it being treated as a taxable benefit. This £150 limit includes all costs associated with the event, such as food, drink, venue hire, and entertainment. If the total cost exceeds £150 per person, the entire amount—not just the excess—becomes taxable. To ensure compliance and maximize this exemption, it’s essential to plan within the limit and keep detailed records of the expenditure. Combining this exemption with trivial benefits (e.g., small gifts for employees at the event) can create a festive experience while staying tax-efficient.

Final Thoughts

Trivial benefits offer an excellent way for small businesses to show appreciation and improve employee satisfaction in a tax-efficient manner. When used correctly, these small perks can go a long way in building a positive workplace culture without the financial burden of additional taxes. However, it’s crucial to understand the rules, especially the £50 limit and non-contractual nature, to ensure compliance.

By making the most of trivial benefits, you can create a happier, more engaged team that appreciates the personal touches you bring to the workplace. After all, sometimes it’s the little things that make the biggest difference.