Yes you can buy your employees one-off gifts without any further tax or national insurance consequences providing it meets the criteria of a trivial benefit.
If an employer provides a trivial benefit to its employees, the benefit is exempt from tax as employment income if all the following conditions are satisfied:
- The cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person)
- The benefit is not cash or a cash voucher
- The employee is not entitled to the benefit as part of any contractual obligation (as per their employment contract)
- The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)
Where the employer is a close company and the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year.
If any of these conditions is not satisfied, then the employee is taxed via a P11D form and the employer would then be liable to Class 1A national insurance. The employer could elect to cover these in a Pay As You Earn Settlement Agreement (PSA) with this the employer agrees to settle the liability themselves.
The other types of trivial benefits that are allowed include:
- Taking a group of employees out for a meal to celebrate a birthday
- Buying each employee a Christmas present
- Flowers on the birth of a new baby
- A summer party for employees
If the cost of the benefit is over £50, the whole amount is taxable and not just the excess over £50.
The type of benefits not allowed under the exemption include:
- Providing a working lunch for employees (because this is related to their employment)
- Gifts, incentives or events related to performance targets or results
- Gifts, incentives or events in relation to employment services e.g. team-building events
- Taxis when employees work late
If you want to discuss this further, please get in touch today and we can help you explore the different ways you can reward your staff. Please contact us on 0800 0523 555 or use our simple online contact form to arrange a free initial consultation.
By Samantha Skyring FCCA
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.