With the season of goodwill upon us our tax team look at a little known and little utilised tax saving, known as trivial benefits.
Trivial benefits is a mechanism whereby employees and/or directors can be given trivial benefits such as vouchers or maybe even office pizzas.
The benefits are limited to £50 per person in single awards with a maximum of six awards through the year. Where used correctly this adds up to £300 of tax efficient benefits.
The benefits cannot be a reward for employment and must be available to all employees, or maybe just directors/shareholders.
For example office pizzas on a Friday must be available to all staff, though it is acceptable if staff who don’t work a Friday we’re omitted for obvious reasons.
Business owners therefore need to be careful to consider all employees if a £50 Christmas voucher is being awarded.
It is also possible to just pay the £50 to each director, forsaking employees, which over six occasions in the year, gives a tax free boost of £300.
The vouchers are tax deductible from the company’s profits and are not subject to pay as you earn or national insurance. Neither are they reportable on a P11d. This makes them very tax advantageous for businesses.
Cathy Rogers, partner at NR Barton, said of the benefit: “This is a little known benefit but when added up across the year can result in a respectable tax saving.
“Many business owners use the trivial benefits among staff and teams to help boost morale and maintain a company spirit.
“Many directors also use the benefit to add a tax free cherry on top of their income for a year.”
With Christmas around the corner this could well be a timely benefit for business owners either looking to give some benefit to their team or even to boost their own benefits.
For more advice on trivial benefits and other tax opportunities please contact our tax team.
