Tax & admin · 6 December 2017

The tax-exempt bonuses most small businesses miss out on

woman giving a christmas gift
Trivial benefits allow employers to reward staff tax-free

Fewer than one in ten employers are aware of government allowances that enable them to give tax-exempt bonuses and rewards to staff.

HMRC’s Trivial Benefits Allowance permits employers to give certain types of benefit and/or reward to their staff tax-free. However, research has shown that only a minority of business owners are aware of these tax-exempt bonuses.

A survey of more than 1,500 British workers and business leaders found that just over a fifth knew of the available tax relief on trivial benefits, with only 11 per cent planning to take advantage of the rules before the end of the current tax year.

With the Christmas gift-giving period fast approaching, the research from One4all Rewards also showed that 83 per cent of company bosses would like to give more regular bonuses and rewards to their staff.

HMRC seasonal rules allow employers to throw staff a tax-free Christmas party

Meanwhile, more than half the business leaders surveyed said they didn’t currently give their employees non-performance related benefits because the business didn’t have the budget and couldn’t afford it.

HMRC made changes to employee benefits rules in April 2016, allowing businesses to benefit from tax-exempt bonuses by reducing tax and national insurance contributions charges.

Despite the rule changes, only ten per cent of UK employers currently take advantage of the tax exemption on trivial benefits, according to the research.

According to trivial benefits rules, companies don’t have to pay tax on an employee benefit if it; costs less than £50, isn’t cash or a cash voucher, isn’t a performance-related reward, isn’t in the terms of their employment contract.

Even though the cash value of trivial benefits tends to be relatively small, the survey found that receiving this type of benefit at the end of the year would improve an employee’s morale (48 per cent), make them feel more loyal to their firm (35 per cent) and more motivated to work harder (31 per cent).

At Christmas, almost half of workers said that a bonus or reward, unrelated to their performance, would boost their morale. According to the research, some 62 per cent said that rewards in the form of a gift voucher or card (which allowed them to choose their own reward), would have the biggest impact on their attitude to work.

Commenting on the trivial benefits rules, managing director of One4all Rewards, Alan Smith, said: “There is lots of potential for British businesses to offer non-performance related benefits to staff under the latest HMRC changes to the workplace benefits rule.

“As Christmas was highlighted as the top season workers would like to receive a benefit, now is the perfect time for business leaders to consider making the most of the tax exemptions on non-performance related trivial benefits.

“The changes to the workplace benefits rule have been introduced to help businesses [that] have limited budgets to reward employees.”

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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