Santa’s clause is coming to town – exemption allows employers to provide a “small gift” to employees that is free of tax
Historically, if an employer chose to give a small gift to employees, there was a requirement to contact HMRC on each instance, and obtain their approval that the gift could be considered ‘trivial’ (as in of low value) and therefore be paid free of tax.
However, from 6 April 2016, a statutory exemption was introduced around trivial benefits which enables employers (who are feeling generous) to give gifts up to £50 each to their employees completely free of tax and without the requirement to obtain HMRC’s prior agreement.
Lisa Wilson, Tax Partner at Cowgill Holloway said: “This is a common sense amendment from HMRC – it wasn’t logical that each instance needed HMRC’s prior approval – and a waste of everyone’s time.
“By providing a framework to work to, it makes it much easier for employers to understand what they are allowed, and ultimately what they aren’t allowed to do – and of course removes some of the potential barriers to employers spreading the Christmas joy to their staff, therefore also aiding in improving staff morale.”
HMRC’s guidelines state that there are several conditions which must be met:
- the cost of providing the benefit does not exceed £50
- the benefit is not cash or a cash voucher
- the employee is not entitled to the benefit as part of any contractual obligation
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.
The information was correct at time of publishing but may now be out of date.