When it comes to limited companies, each director / office holder is allowed up to £300 of trivial benefits per tax year.
Trivial benefits rules
£300 is the total that can be spent per director / office holder in a tax year (6th April to 5th April).
There is also a cap on each single benefit being provided of £50.
It is important to make sure that no single purchase is above £50 otherwise the whole amount becomes a taxable benefit in kind.
A trivial benefit cannot be cash or a cash voucher (a voucher which can be exchanged for cash) and it must not be a reward for an employee / directors work or be a part of the terms of their contract.
Also, very importantly, the cost should be paid for directly by your business bank account – it should not be paid for personally and reclaimed or HMRC could challenge the cost.
A key point to be aware of is that trivial benefits must be genuinely ad-hoc and non-recurring. HMRC specifically look for patterns, and if they see a benefit being provided on any kind of regular or expected basis, they can disallow it.
What counts as a trivial benefit?
Frustratingly (or perhaps typically!) there is not a simple description from HMRC as to what constitutes a trivial benefit.
HMRC will assess the item and apply judgement to it to see if the expense is in reality part of the employee’s remuneration (pay) or if it is genuinely a trivial benefit and meets the criteria discussed earlier in the article.
Some examples of allowable trivial benefits include:
- Bottles of wine
- A Christmas Turkey
- Flowers
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