As you may know, HMRC have strict rules when it comes to benefits and what is treated as trivial. However, did you know, as a director, you can have benefits of up to £300 each year TAX FREE (6x £50 in one year, per director)?
To qualify, the company must be a close company, meaning five or fewer participators (shareholders) who are all directors.
The trivial benefit rule is subject to the following conditions:
- The benefit cost the company £50 or less to provide
- It isn't cash or a cash voucher – so store vouchers or wine and beer, for example, are all fine
As long as:
- It isn't a reward for your work or performance
- And it isn't in the terms of your contract.
When all the conditions are met, the benefit is known as a trivial benefit. There's no need to inform HMRC, and the trivial benefit won't count towards taxable income or Class 1 National Insurance contributions. Trivial benefits don't need to be reported on your annual P11D or P11D(b) forms.
Be careful not to spend any more than £50 each time, otherwise the full value of the benefit will be taxable. This is also not a round sum allowance!
You do actually need to incur the cost and claim the receipted amount, so you can't just claim the full £300 at the end of the year.
Gifts to employees can also be tax free – see here for more information
Please speak to your usual contact or email enquiries@peplows.co.uk if you need further help.