I like to think I’m a very generous boss – I pay my team for their work and I also let them have weekends and evenings off. What more could they want?
But one of my clients has certainly taken things a bit further because they’ve decided to buy each of their team members a gift…every month. And they asked me about the tax implications.
So, I thought it would be worth a little reminder of what you can or can’t buy for your employees and get tax relief, without costing your employee tax.
Gifts to your employees fall under the “trivial benefits” rules. And the rules are that a trivial benefit will get tax relief in your business and have no tax impact on the employee if it meets all of the following:
- It costs you £50 or less to provide (including VAT)
- It isn’t cash or a cash voucher
- It isn’t a reward for their work or performance
- It isn’t in the terms of their contract
The important thing for my client is that there is no annual limit on the number of trivial benefits that you can buy an employee. Therefore, they can buy something every month. However, they will just need to make sure that it isn’t contractual.
How about gifts for yourself?
The business can also buy gifts for you. The criteria for the gift to be tax-deductible are the same as for employees.
However, for directors there is an annual limit of £300 per director.
What if I spend too much?
If you spend more than the £50, you will need to file a P11D form to log the benefit and the employee will pay tax on it. In addition, the business will pay National Insurance.
I hope this all makes sense and inspires you to go out and buy some gifts.