No matter where you look, Christmas is coming which means buying presents for your family and friends but what about giving tax-free gifts to your team?
There is a statutory exemption enabling employers to give their team members a tax-free gift, which is especially relevant at this time of year.
Providing all the following conditions are met the gift will be classified as a ‘trivial benefit’ and will not incur a tax charge for either the employer or the team member:
- The cost of providing the benefit does not exceed £50
- The benefit is not cash or a cash voucher (a gift voucher is acceptable)
- The employee is not entitled to the benefit as part of any contractual obligation
- The benefit is not awarded for recognition of any services performed by the employee (or in anticipation of any such services to be performed)
There is no limit on the number of trivial benefits an employee can receive, except where the benefit is provided to a director or office-holder (or a member of their family or household) of a ‘close company’. In this case an annual cap of £300 per person per tax year applies. Broadly speaking, a close company is one controlled by five of fewer shareholders or a company controlled by any number of shareholders who are also directors.
Employers need to keep records of all trivial benefits given to their team members to demonstrate that the statutory limits have not been exceeded.
If an employer wants to give a tax-free gift to a team member which exceeds £50, there are tax implications for both the employer and team member which need to be considered.
Expert Opinion contributed by Hallidays