What Are Non Taxable or Trivial Benefits?

At McDade Roberts accountants we help our clients work out what employee benefits are allowable and the rate of tax due for non-exempt employment benefits. Here is a quick guide to what is classified a nontaxable or trivial benefit.

Non-Taxable Benefits

Certain benefits are not taxable. The most important ones are:

1. retirement benefits which are paid by an employer into a registered pension scheme
2. meals provided in a staff canteen
3. drinks and light refreshments at work
4. parking provided at or near an employee’s place of work
5. workplace nursery places provided for the children of employees
6. certain other employer-supported childcare up to £55 per week. Any formal registered childcare or approved home childcare contracted for by the employer such as a local nursery, out-of-school club or childminder may be covered by this exemption
7. in-house sports facilities
8. payments for additional household costs incurred by an employee who works at home
9. removal and relocation expenses up to a maximum of £8,000 per move
10. the provision of a mobile phone or vouchers to make available a mobile phone (limited to one phone per employee only)
11. annual social functions for employees provided the total cost of all events in a tax year is less than £150 per head
12. trivial benefits up to £50 or £300 per annum in close company situations.

Trivial Benefits

For many years HMRC had been prepared to accept that trivial benefits were not taxable under certain circumstances. A statutory exemption applies from April 2016 for trivial benefits in kind. The exemption sets out a number of conditions that must be met for a benefit to be exempt which are that the:

1. cost of providing the benefit does not exceed £50
2. benefit is not cash or a cash voucher
3. benefit is not provided under salary sacrifice arrangements or any other contractual obligation
4. the benefit is not provided in recognition of particular services performed by the employee in the course of the employment or in anticipation of such services.

In addition where qualifying trivial benefits are provided to directors and other office holders of close companies they will be subject to an annual cap of £300. In a case where the benefit is provided to a member of the employee’s family or household who is not an employee of the employer, this benefit will count towards the £300 exempt amount. Where the director's or other office holder's family or household member is also an employee of the company, they will be subject to a £300 cap in their own right.

Taxable benefits

The following benefits are taxable on all employees:

1. any living accommodation provided, unless job related
2. vouchers
3. credit tokens.

Confused? Don’t be. McDade Roberts are here to help so feel free to arrange a free initial appointment to see how we can help you understand the rules around employment benefits.