What is the trivial benefits exemption?

Since April 2016 employers can provide a range of of small (i.e. trivial) benefits in kind to their employees without them counting as taxable perks. HMRC relies on three factors to prevent the exemption being exploited:

• The exemption doesn?t apply if the benefit is given as a substitute for normal wages;
• Employers are cost-conscious and so won?t want to pay for vast numbers of perks for employees;
• Company Directors may well not worry about the second point and be tempted to take a considerable number of exempt perks for themselves. The exemption is therefore capped for directors of close companies (broadly, those controlled by five or fewer individuals);
• The cap for directors is set at ?300 per year, and at ?50 per perk for both employees and directors.

Top tips

Tip 1:?There is nothing to stop you using the exemption multiple times in a short space of time. So although there?s only a few weeks left in the tax year, there?s still time for you to make use of the full ?300 allowance, across several perks.

Tip 2: If your spouse or partner is also a director, they are entitled to their own trivial benefits exemption, which you can use in tandem in yours. For example, while a single exemption might only cover the cost of, say, a single theatre ticket, if your spouse is also a director, their exemption could cover the other ticket, giving you both a night out on the company without triggering tax or NI.

Tip 3:?If you can?t find anything suitable to spend your company?s money on by the end of the tax year, you can use the exemption to buy retail vouchers of ?50 each. But the benefit is treated as arising at the time your company purchases the vouchers, not when you redeem them. So if you were to buy six vouchers from the same place at the same time, HMRC might argue this is a single benefit. Avoid this trap by buying them at separate times and choose online retailers who offer a wide range of goods to buy, such as Amazon or Tesco.

But be aware…

Before you rush off to spend your company?s money, make sure you don?t fall foul of a common error:

The trivial benefits exemption doesn?t apply to cash payments or the equivalent

Trap 1:?If your company pays a personal bill for you, say for your home broadband, that?s not a perk. It?s equivalent to cash and must be taxed as if it were salary. However, if the contract for the broadband (or other goods or services) is between your company and the provider, that is a perk and the exemption can apply.

Trap 2:?The trivial exemption applies to single bills. So if your company has contracted for a continuous service, such as a broadband contract, the whole contract is a single benefit. So it is the whole contract that is the perk – not each monthly installment.

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