The trivial benefits in kind (BiK) exemption applies to small non-cash benefits like a bottle of wine or a bouquet of flowers given occasionally to employees. By taking advantage of the exemption employers can simplify the treatment of BiKs whilst at the same time offering a tax efficient way to give small gifts to employees.
Although the benefit is defined as ‘trivial’, employers should remember that this offers a great opportunity to give small rewards and incentives to employees. The main caveat being that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.
The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions.
Conditions for tax exemption
The tax exemption applies to trivial BiKs where the BiK:
- is not cash or a cash-voucher; and
- costs £50 or less; and
- is not provided as part of a salary sacrifice or other contractual arrangement; and
- is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.
The rules allow directors or other officeholders of ‘close’ companies (companies run by five or fewer shareholders) and their families to benefit, but overall payments made in a tax year cannot exceed £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year. The £300 cap does not apply to other employees.
Note that if the £50 limit is exceeded for any gift, the full value of the benefit will be taxable – not just the excess over £50.