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HMRC internal manual

Employment Income Manual

Particular benefits: exemption for trivial benefits – conditions to be satisfied – contractual obligation (from 6 April 2016)

Section 323A(7) and (8) ITEPA 2003

Note: this guidance has effect for benefits provided from 6 April 2016 onwards. For guidance on HMRC’s approach to trivial benefits for tax years 2015 to 2016 and earlier, see EIM21860.

The guidance at EIM21864 sets out the qualifying conditions that determine whether or not a benefit provided to an employee is exempt from tax as a trivial benefit.

One of the conditions that has to be satisfied before the trivial benefits exemption can apply is that the employee is not entitled to the benefit as part of a contractual obligation (including under salary sacrifice). Therefore, if the employee is entitled to the benefit, whether because of a clause in their employment contract or some other agreement, then the exemption does not apply and the benefit should be taxed in the usual way, regardless of how small the cost.

Just because a gift is provided each year, or is provided to all staff members, does not mean that the employee has a contractual entitlement to it. You should not normally seek to challenge modest gifts that are provided infrequently to employees, just because they are given to employees each year – for example, a Christmas or birthday gift.