Trivial Benefits

“Ho! Ho! Ho!” came the shout from Santa Inspector, the red-faced, good-natured bearded individual in a fetching red suit. “I’ve caught another one!” they cried. The elves rushed over to see what the fuss was about.

“I’ve found another lovely employer who gave gifts to their employees without telling me, and they haven’t paid any tax or National Insurance on them,” Santa announced.

“But Santa,” said one elf, “isn’t it good that employers are treating their employees well? Isn’t that the spirit of Christmas?”

“Of course it is,” replied Santa. “But most employers don’t realize that if they provided the gift differently, they wouldn’t have any hassle or obligations. They could use the Trivial Benefits exemption, which is legal and straightforward.”

“But what is the Trivial Benefits exemption?” asked an elf.

“The rules are simple: the item must not be cash; it must cost the employer less than £50 (including VAT); it must not be provided due to any contractual terms; and it must not be a reward for work done.”

“Those rules seem easy to follow, so why do employers get them wrong?” asked the elf.

“Employers forget that the item must be bought by them and not reimbursed to the employee, and that gifts as a thank you for good work don’t qualify for the exemption,” Santa explained.

“Oh dear!” said the elf. “If we got it wrong, you’d think we were a bad elf and get rid of us.”

“Don’t be so elf-deprecating. We’d never get rid of you for that. But employers who get it wrong would need to pay extra tax and NI, making the gifts expensive.”

“So can they give their employees a gift at Christmas?”

“Of course, as long as the conditions are met,” Santa assured.

“Thanks Santa, and can I just say your elf puns really sleigh!”

If you need any help with the exemption, please contact our helpful UNW elves at employmenttaxesteam@unw.co.uk.