Trivial benefits – not so trivial
At this time of year I often get asked if bonuses can be given to staff without putting them through payroll. The answer, unfortunately, is no!
What I suggest is a very underused HMRC exemption known as 'trivial benefits'. You don't have to pay tax on a benefit for an employee if all of the following apply:
- It costs you £50 or less to provide
- It isn't cash or a cash voucher
- It isn't a reward for their work or performance
So, what does this mean in practice?
Well, you could buy a bunch of gift cards at £50 each and give them to staff at Christmas, or any time that you like really. Or you could do wine or spirits if you prefer.
And don't forget yourself! If you trade through a company then you (and possibly your spouse) are employees too.
Looking at the numbers, as I do. If you wanted to give an employee a net cash bonus of £50 it would cost your business £83.68, including the cost of tax and NIC. Not very cost-effective is it?That is why I like these trivial benefits so much.
There is no set limit on the amount of trivial benefits a member of staff can receive during a year. However, HMRC imposes an annual cap of £300 on directors.
Just bear in mind the rules. Don't say 'Hey guys, you have worked really hard this month so here's a bottle of champagne'. That would be a reward for services. But if you say 'The sun is out, the sky is blue - I'm in a good mood and this is for you!' that would work perfectly.
Personally I use Salisbury Gift Cards (because I want to support our city) or Waitrose vouchers.
Let us all have some nice tax-free benefits this Christmas!