When can a benefit be exempt from tax? When HM Revenue and Customs (HMRC) decides it’s trivial enough not to pursue, is the answer.
But be warned. The term ‘trivial’ can be subjective because there is no statutory limit below which benefits are not taxable. You need to consider if HMRC’s agreement should be obtained; for example, for a higher-paid employee, a one-off gift of £100 may seem trivial in value.
HMRC should not insist that every trivial benefit should be reported on a P11D form or included in a PAYE Settlement Agreement (PSA), so it is always worth checking if a benefit might fall into that ‘trivial’ category before making a submission.
However, cash benefits (benefits that have a ‘money’s worth’) and non-cash vouchers will never qualify, no matter how small the amount. But other items, where it can be sensibly argued that the cash equivalent of the benefit taxable on the employee (or on each individual employee concerned, if there is more than one of them) is not worth pursuing, may be allowed.
So what might be considered trivial? I have seen HMRC agree to MP3 players and other gifts up to the value of £100, but more likely items are things such as:
- Small gifts, like a flower arrangement.
- Seasonal gifts, such as a turkey, an ordinary bottle of wine (Moet lovers need not apply!) or a box of chocolates at Christmas
- Access to workplace tea and coffee facilities, or water from a cooling dispenser.
- Seasonal flu immunization jabs.
- A very small fee paid by the employer to allow employees access to a discount shopping website (but not a contribution to the level of discount available).
Susan Ball is director of employment tax and advisory services at Crowe Clark Whitehill