If you buy your employees a seasonal gift such as a joint of meat or a box of chocolates, then this would be deemed ‘trivial’ and therefore, there are no reporting requirements and nor would any tax or National Insurance be triggered. HM Revenue & Customs (HMRC) will accept a benefit is trivial if it satisfies these conditions:
- 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 (including under salary sacrifice arrangements); and
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
Directors can also receive trivial benefits, but they cannot receive trivial benefits worth more than £300 in a tax year if the company is classed as a "close company". The definition of a close company is complicated but generally it is a limited company that’s run by 5 or fewer shareholders.
For more generous gifts, the cash equivalent must be taxed via the payroll, form P11D or a Pay As You Earn Settlement Agreement (PSA). With the first two options, tax and National Insurance will be triggered and will be deducted from the employee. However, with a PSA the employer agrees to settle their liability.
Gifts and entertaining is a complex area, as it can have multitude of tax, National Insurance and VAT implications. Please feel free to contact your local TaxAssist Accountant if you would like to discuss this further.
By Jo Nockels
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.