Contractor's Guide to Trivial Benefits

Go through our guide to find out what tax-free benefits you can offer to your employees.

Are you looking for ways to make your limited company’s money go further? Just read the changes about trivial benefits where you can get the guidance about what trivial benefits are or how you can claim, go through our guide.

What are trivial benefits?

Since 6th April 2016, the directors (not shareholders) and employees can obtain ‘trivial benefits’ by their company with no tax or National Insurance implications. There is a £300 annual cap for trivial benefits to those contractors who work via a close company (a limited company that’s operated by 5 or fewer shareholders).

How much can I claim?

There is no restriction on the limit on the number of ‘benefits’ offered, as long as they do not go beyond £50 at a time, or £300 in total over the year. For example, there could be 30 claims of £10 or 6 claims of £50. If any ‘benefit’ goes beyond the £50/£300 limits, they are no longer permissible via the business. You don’t need to let HMRC know or pay tax or National Insurance.

What counts as a trivial benefit?

You don’t require to pay the tax as long as you meet the following criteria:

  • The benefit costs you £50 or less.
  • The benefit shouldn’t be a cash or a cash voucher.
  • The benefit shouldn’t be a reward for good work or performance.
  • The benefit shouldn’t be an existing or recurring cost such as a membership.
  • The benefit shouldn’t be in the contract terms.

What can’t be claimed?

There are also particular things which can no longer be claimed as far as the rules changes:

  • The gift cannot be in the cash form or cash vouchers (that means vouchers can be exchanged for cash). So, shop vouchers would be preferable, as long as they cannot be exchanged for cash.
  • The employee should not be eligible for the benefits as a form of any contractual arrangements (this consists of any salary sacrifice arrangements).
  • The ‘benefits’ should not be offered in lieu of specific services performed by the employee, as part of their employment obligations.
  • The ‘benefits’ cannot be a frequent payment i.e. employee of the month, gym membership.
  • The £50/£300 amounts are limits and not allowances, therefore receipts must be held to support the claims and an expense must have actually been incurred instead of claiming the full allowance at the end of the year. In addition, you must be cautious not to spend beyond £50 for avoiding the entire expenditure being categorized as a taxable benefit instead of just the excess.

How can Nexa Accountants help me?

Getting the best possible advice related to your finances as a contractor is not that easy. At Nexa Accountants, we’re here to make your life as much simple for you. Whether you’re searching for existing support with your accounts or advice about expenses, we can help.