Navigating tax-free employee gifts part 1

As we approach the end of the year, it’s a time when many businesses will be thinking of making gifts to their employees.

It’s a great time to show those who work for you that you care about them and appreciate what they do. The good news is that it’s possible for these gifts to be tax-free! Gift vouchers may qualify as a trivial benefit if they are not exchangeable for cash, however, gift cards are more likely to meet the criteria.

Under the Trivial Benefit rules, non-cash gifts (such as wine or hampers for example) worth up to £50 can be awarded to employees free of tax. There is no limit on the number of items that can be given in a tax year, except for directors or their close family where there is a limit of £300 per year.

Here are some questions we are asked frequently…

How often can I give a trivial benefit to employees?Whilst there is technically no limit for employees, the benefit ceases to be trivial if it becomes a regular occurrence. The £300 limit per annum for directors is a useful guide as to the number of times it would be expected for this benefit to be used.

Can I use this to give tax-free gifts to employees who have met their KPI targets?No, trivial benefits cannot be linked to the work or performance of an employee. A performance–related reward would be taxable as income for the employee.

What are the conditions for directors?The same £50 limit applies, and there is also an annual cap of £300 on the aggregate value of trivial benefits that can be given to the directors or office holders of the company, or their close relatives.

I’m looking to pay for my employees to have a day out. Is this considered a trivial benefit?HMRC does allow employers to cover the cost of an annual party or similar social function, without the employees attracting a tax charge. In order to qualify, the event must be open to all your employees, be an annual function (such as a Christmas party or summer barbeque), and should cost £150 or less per person. It’s important to note that the £150 per person limit includes all costs associated with the function such as transport, food and drink, accommodation, and VAT.

With years of experience in taxation, we can work with you to clarify your goals and formulate a clear plan for you, giving you inspiration and direction to help you maximise your growth potential. Get in touch with the team at Oldfield via  info@oldfieldadvisory.com or call 02476673160 and we will be happy to advise on the best solutions for your business.

Please note: This article is provided for information only and was correct as at time of writing (17/10/23). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.