Particular benefits: exemption for trivial benefits – conditions to be satisfied – not in recognition of particular services (from 6 April 2016)
Section 323A(9) 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 benefit exemption can apply is that 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). Therefore, if the benefit has been provided in recognition of services, including as a reward for services and because of something they have had to do as part of their employment duties, it should be taxed in the normal way.
Typically, trivial benefits include benefits provided solely for staff welfare purposes such as a bunch of flowers on the birth of a child or a bereavement. Benefits provided in recognition of services provided such as long service awards and social events as a team-building event or as a thank-you for good results in the year will not qualify as trivial benefits. However, another exemption might apply in particular circumstances.
Employer E requires its employees to work through their lunch hour and provides them with lunch. The meal has been provided because of the work they are undertaking. The benefit does not satisfy the requirement that it is not provided in recognition of particular services performed by the employee and so the exemption does not apply.
Employer F runs a call centre and gives £25 gift vouchers to employees who hit specific performance targets each week. The gift vouchers are provided in recognition of the services provided and so the exemption cannot apply.
Employer G provides all of its staff with a Christmas gift to the value of £30 each year. The employees receive the gift each year regardless of their performance during the year. The gifts are not provided in recognition of the employees’ services and are merely a gesture of goodwill at Christmas. Subject to the other qualifying conditions being satisfied, the exemption can apply.
Employees of employer H have to work late from time to time and on those occasions their employer provides them with a taxi to take them home. The taxi is provided because they have worked late and so the exemption does not apply. However, the late night taxi exemption may apply (see EIM21831 onwards).
The vast majority of employers will only provide their employees with benefits that are not linked to particular services on an irregular or infrequent basis. There is a cost to the employer of providing such benefits and the employer will want to be careful in managing its employment costs. Therefore, if an employer provides their employees with benefits on a regular or frequent basis you should consider whether they are linked to the employee’s services.