Can an employer provide tax-free gifts to their employees? Answered by: Katie Williams, of Hazlewoods LLP Generally, any gifts provided to an employee will be taxable as a benefit-in-kind. There is, however, a ‘trivial benefits’ exemption which allows certain benefits up the value of £50 to be exempt from income tax and national insurance contributions and without the need to report such gifts to HMRC. There are a number of conditions to be satisfied in order for a gift to be treated as a trivial benefit including: the benefit cannot be cash or a cash voucher (non-cash vouchers such as high street vouchers are fine); the cost of the benefit cannot exceed £50 (including VAT); the benefit must not be provided in respect of a salary sacrifice arrangement or a contractual obligation; and the benefit must not be provided in recognition of the employee’s services in the course of their employment. If the cost of the gift exceeds £50, the employee will be taxed on the full amount and not just the excess. There is no cap on the number of trivial benefits that can be provided to an employee in a year, however, directors of close companies will be subject to an annual exempt amount of £300. Long service gifts can also be provided to employees where they have been with the business for at least 20 years. A non-cash award of up to £50 for each year of service can be given e.g., an employee reaching their 25th work anniversary could receive a gift with a value of up to £1,250. For the benefit to be exempt, there must be a gap of at least 10 years between each gift. If you are looking to revamp the remuneration package offered to your employees, we would recommend that professional advice is sought beforehand to confirm the tax implications of the various benefits offered for both the employer and the employee. For more information contact Katie Williams on 01242 237661 or visit hazlewoods.co.uk. Post navigation Q&A: Can an employer offer tax-free loans? Q&A: How many companies now offer hybrid working?
