Small Gifts and Trivial Benefits for Employees

Thinking of rewarding your team for their hard work from home over the last few months? Here’s something you should know…

Despite the general prohibition on entertainment and gifts, since April 2016, gifts of up to £50 at a time, per employee are deductible to the employer and not taxable for the employee. There is no limit to the number of gifts made to each employee, except for the so-called “close companies”.

What are closed companies? Those controlled by five or fewer people, or by just the directors. In these cases, there is an annual limit of £300 per director and other officeholders (essentially company secretaries). In this latter case, gifts to relatives of the directors/officeholders are also included in the £300 limit.

There are a few key restrictions, which are:

• The gift must not be cash or a voucher which can be redeemed for cash (but store vouchers which only be redeemed for goods are ok!)
• The employee has no contractual right to the gift, neither is it part of a salary sacrifice arrangement. No easy loophole here!
• The gift is not in recognition of particular services – either past or future.
• For companies controlled by five or fewer people, gifts to members of the employee’s household are included for anyone who is a director or officeholder of the company. There is also an annual limit of £300.

£50 is the VAT-inclusive cost of the gift or benefit.

This is a very useful and flexible provision as it can cover a wide range of potentially taxable items, such as a gift of wine or a meal for a staff group, so long as the cost per employee is under £50.

Let’s see that in practice:

Fantabidosey Ltd provides each of its 50 employees and a handful of key customers a bottle of champagne each for Christmas. So long as the cost per employee is under £50, this is a trivial benefit for the employee and does not need to be included on a P11D.

If you’re unsure about any of this, please get in touch as we’ll be able to help. We also recommend taking The Quiz to find other tips on where you can improve your profits!