A Father’s Day tax exemption
With Father’s Day fast approaching, the trivial benefits exemption could be a tax-efficient way to treat your dad if he is an employee or director of your company.
Expenses or gifts, provided by employers, to employees or directors may not need reporting to HMRC if they meet all these requirements:
- Does not exceed £50
- Is not cash or a cash voucher
- Is not a reward for work performance
- Is not part of a salary sacrifice.
If all these conditions are met, it is considered a trivial benefit and is exempt from tax payment.
If benefits to employees or directors do not meet all these conditions, they will need to be taxed through a P11D form or through the payroll.
Keep in mind that VAT is factored into the price of the benefit and therefore the benefit must cost £50 or less including VAT. On top of this, if it is part of a bulk purchase the price must be averaged across all employees who receive the benefit.
Whilst HMRC does not need to be informed of these gifts, they reserve the right to check business records at any point. If they have decided to investigate business records, they will contact you via letter whereby they will request a phone call. During this call, they will ask relevant questions relating to the legal records to confirm you are meeting your legal responsibility as a business.
There should be a detailed record of the trivial benefits containing dates, details of benefit, amount of benefit and evidence of expense (i.e., a receipt or invoice) kept for at least 3 years.
If one day is not enough to show just how much you appreciate your Father, this exemption lasts year-round and the number of trivial benefits provided to a particular member of staff in a single tax year is unlimited, but each item provided has to meet all of the four conditions listed above. However, it should be noted that company directors cannot receive trivial benefits exceeding £300 per tax year.