Section 323A ITEPA 2003 sets out a statutory exemption for trivial benefits. Under this exemption, if an employer provides a benefit to its employees, the benefit is exempt from tax as employment income if all the following conditions are satisfied:
- the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person) (see EIM21865)
- the benefit is not cash or a cash voucher (see EIM21866)
- the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements) (see EIM21867)
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services) (see EIM21868)
- Where the employer is a close company and the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year (see EIM21869).
Here is an example
The Employer provides each of its employees with a bottle of wine costing £25 on their Birthday. However, as an alternative, it provides employees who do not drink alcohol with a £25 gift voucher for a national supermarket chain which they can exchange for an alternative non-alcoholic gift. Both the bottle of wine and the non-cash gift voucher can be covered by the exemption.
In fact, all shop vouchers that can’t be cashed in will count provided the value is £50 or less.
So why not make a list of special occasions:
Birthday
Christmas
New Year
Anniversary
Holiday
Easter
Buy a stock of vouchers and give them out.
This is a fantastic tax free benefit.