Writing my blogs, I’m aiming to strike a balance between conversational viewpoints and content that will be useful to businesses.
This one is going to be a little more technical than usual, but bear with me because it’s all about optimising tax benefits.
Trivial benefits are defined by HMRC as benefits provided to an employee which meet all of the following criteria:
1) Not Cash
2) Each benefit costs less than £50 per employee
3) The Employee is not contractually entitled to receive it
4) Is paid in addition to normal pay
Remember that directors are employees and so owner-managers can take advantage of this, although if you’re a close company then the total annual benefit is capped at £300 per director (the cap also applies to members of a director’s household). There is no limit on the total value of benefits provided to employees who are unrelated to directors.
My business has used trivial benefits to pay for a surfing lesson for my kids this summer, and for a meal out for the directors, to celebrate a wedding anniversary.
The great thing about Trivial Benefits, as opposed to staff entertaining, is that as employment benefits they are deductible for VAT and corporation tax.
As a reminder, there is also a staff entertaining allowance of £150 per employee, which is in addition to any Trivial Benefits paid for by the business. This allowance is intended to fund annual events such as Christmas or summer parties. Directors attending events that are funded using the staff entertaining allowance will be exempt from income tax, however the company will not be allowed to claim back VAT or deduct the cost for corporation tax if the event was attended only by directors.
1 A close company is one where the company is under the control of 5 or fewer directors/shareholders