At times it can seem difficult to find a way to reward or support your staff in addition to their salaries without incurring additional paperwork and National Insurance costs for the business, along with extra tax charges for the staff. This does all rather take the shine off the gesture.

However, a few years ago legislation was brought in that allowed a statutory tax exemption for what are known as ‘trivial benefits’. It is worth revisiting this topic, as it does enable employers to reward their staff tax-free, and although there are (of course) certain limits imposed by HMRC, these are not actually too restrictive.

In order for a gift you make to an employee to be considered a trivial benefit, the following must apply:

• it cost you £50 or less to provide
• it isn’t cash or a cash voucher
• it isn’t a reward for their work or performance
• it isn’t in the terms of their contract

In other words, you can make multiple gifts to employees in a tax year provided these conditions are met each time, although it should be noted that these need to be ad hoc – if you were to give an employee a £50 supermarket voucher every month, HMRC would consider this to form part of their normal salary.

There is an additional restriction for the directors (and family members of directors) of close companies (i.e. those privately owned and controlled by 5 or fewer directors). In this case, there is a cap of £300 on the maximum amount of benefit within the year. That is still a generous allowance available tax-free with a bit of planning.

If you would like further information or you would like to discuss how we could help you, please get in touch.