The run-up to Christmas is always a busy time for businesses; planning, wrapping up projects, and making sure your team feels valued as the year comes to an end. Many companies like to show their appreciation by buying gifts or organising festive get-togethers. But did you know that HMRC’s Trivial Benefits exemption and the Annual Staff Events exemption can make this easier and more tax-efficient?
What counts as a trivial benefit?
A trivial benefit is a small perk you can provide to staff without needing to pay tax or National Insurance on it, and without having to report it to HMRC.
To qualify, each benefit must:
- Cost £50 or less per person
- Not be cash or a cash voucher
- Not be a reward for work or performance
- Not be part of a contractual agreement
This makes Christmas gifts like a bottle of wine, a festive hamper, or a store voucher or gift cards a great option.
Annual staff events exemption
Christmas parties and team get-togethers fall under a separate exemption: the Annual Staff Events exemption.
To qualify, the event must be:
- Annual (e.g. Christmas or summer parties)
- Open to all employees (not just directors or selected staff)
The key points are:
- The limit is £150 per head per year (including VAT).
- The value is calculated by adding up all costs e.g. food, drink, venue hire, entertainment, and any related travel or accommodation such as taxis or hotels.
- This total is then divided by the number of attendees, not just employees. So if employees bring guests, the cost per head includes them too.
- If the cost goes even £1 over the £150 per head threshold, the entire amount becomes a taxable benefit. Therefore careful planning matters!
Director Trivial Benefits
For directors of close companies (broadly, companies with five or fewer shareholders who are usually directors themselves), there is a separate rule.
- Directors can receive trivial benefits, but they are capped at £300 per tax year per director.
- Each individual trivial benefit must still fall within the £50 per head limit and meet the usual conditions.
- Eligible benefits can include a wide range of items such as gift vouchers, hampers, meals, or even team-building events for yourself and your employees.
- This means directors of small owner-managed companies can enjoy a handful of small gifts throughout the year with Christmas being a perfect opportunity.
Why it matters
These rules mean you can thank your employees and celebrate the festive season in a tax-efficient way, without extra tax or National Insurance liabilities. For directors of smaller businesses, the cap ensures you can still take advantage of the rules personally.
Christmas is the ideal time to make use of both Trivial Benefits and the Annual Staff Events exemption rewarding your team and yourself while staying compliant and tax-savvy.
If you want more information on how your team can benefit from Trivial Benefits get in touch with us today.
