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Over the festive period some employers may show their appreciation of hard working employees by giving them a small gift. If the employer meets the relevant conditions, a tax charge won’t arise on the employee.
A tax exemption is available which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee benefit in kind. For the benefit to be exempt it must satisfy the following conditions:
If any of these conditions are not met, then the benefit will be taxed in the normal way, subject to any other exemptions or allowable deductions.
One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable (not just the excess over £50). The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average should be used.
You can find more information on how the exemption will work (including family member situations) in the HMRC manual.
If you are unsure on the tax treatment for the gifts you will being providing your employees, please contact:
Payroll & HR Senior Manager
Tel: +44 (0)20 3667 5971