From the treatment of trivial benefits is provided for in legislation.

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1 TRIVIAL BENEFITS Introduction Years up to 2015/16 Years from 2016/17 Introduction From 6 April 2016 there is an exemption for qualifying trivial benefits in kind costing less than 50, extending to qualifying benefits provided to former employees. An annual cap of 300 applies to office holders of close companies, and employees who are family members of those office holders Years up to 2015/16 For years prior to , HMRC operate an informal, practical exemption for trivial benefits where the burden on the employer of P11D entries and the cost to HMRC in processing such entries would be disproportionate. The benefit must be trivial in an absolute sense, not in comparison to the employee's salary. However, the overall cost to the employer is not relevant, so large employers are not disadvantaged. Note that the exemption does not apply to cash or money's worth, including arrangements that save the employee from expenditure that would normally have been incurred. Nor may the exemption be claimed in order to extend a statutory limit on the grounds that the excess is trivial in amount. Benefits that might be treated as trivial in this manner are likely to be related to staff welfare rather than a reward for services; for instance, a small gift in recognition of a particular event such as marriage or the birth of a child, or a seasonal gift, or the provision of free tea and coffee. HMRC may consider whether it would be suitable to include items in a PAYE settlement agreement, but if a benefit is genuinely trivial this should not be pursued. Where HMRC agree that a benefit is trivial, this will be acknowledged in a letter setting out the circumstances and warning that the exemption may not survive a change in those circumstances. Years from 2016/17 From the treatment of trivial benefits is provided for in legislation. No liability to income tax arises on a benefit provided to an employee or member of the employee's family or household if four conditions are met. In the case of a director or office holder of a close company, a fifth condition is added. As a consequent there is no reporting requirement. The four conditions applying to every employee (conditions A-D) are as follows.

2 (a) The benefit is not cash or a cash voucher. (b) The cost of provision does not exceed 50. Where it is impractical to calculate this, an average, arrived at by dividing the cost by the number of employees receiving the benefit, is used. (c) The benefit must not be provided under salary sacrifice arrangements. (d) The benefit must not be provided in recognition of particular services in the course of the employment, nor in anticipation of such services. The fifth condition (condition e), applying to directors or office holders in close companies, is that the cost provision should not exceed the employee's available exempt amount. The available exempt amount is the annual exempt amount of 300 reduced by the cost of any trivial benefits provided earlier in the year plus amounts allocated to the employee on provision of a benefit to a family or household member. Rules for allocation of the cost of provision in such circumstances are necessary because in a close company it is highly likely that the family or household that includes the recipient also includes a number of people who are connected with the company in a material way. Thus, where a trivial benefit is provided to a member of an employee's family or household who is not an employee, the amount of the cost allocated to the employee is the cost divided by the members of the recipient's family or household who are: (a) directors or office holders of the employer; (b) employees of the employer who are members of the family or household of a person within (a) above; (c) former employees who were directors or office holders at a time when the employer was a close company; and (d) members of the family or household of a person within (c) above. Changes to the conditions which must be satisfied for the exemption, and any consequential adjustments to the calculation of the available exempt amount, may be made by regulations.

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