Flow chart - trivial benefits exemption

The trivial benefits exemption allows employers to make low value gifts and provide tax and NI-free perks to employees, directors and their families. Naturally, there are conditions but these have been made more difficult by HMRC’s increasingly vague interpretation. Nevertheless, the exemption is a useful tool for legitimately saving tax and NI charges and the admin which goes with them.

Flow chart

The Flow Chart - Trivial Benefits Exemption will help you to decide if you can use the trivial benefit exemption for one or more staff perks.

Definitions for the flow chart:

• Cash - money in the form of currency, credit to a bank or other account etc. from which the owner can draw currency
• Cash voucher - a voucher, stamp or similar document capable of being exchanged for a sum of money (cash) which is greater than, equal to, or not substantially less than the expense incurred by the person, e.g. an employer, who provided the voucher. Therefore, this does not include retail vouchers unless they can be exchanged for money
• Close company - generally, a company controlled by five or fewer individuals
• Office holder - a director or company secretary whose name is recorded on the Companies House register as such
• Contractual right - an entitlement to a benefit in accordance with a written, oral or implied agreement
• Salary sacrifice arrangement - any arrangement, written or otherwise, whereby the employee permanently gives up part of their salary in exchange for a non-cash benefit in kind
• Optional remuneration arrangements (OpRA) - as set out in tax legislation. They include any arrangement, including a salary sacrifice, which results in an employee receiving a benefit in kind instead of salary. For more information about the rules refer to https://tinyurl.com/klpg73j
• Other exempt benefits - benefits which by law or HMRC practice are not liable to tax and or NI. For more information about these refer to HMRC’s guidance at https://tinyurl.com/y2x3ml6q

Document

You may find our Letter to Employee Regarding Trivial Benefits useful.