A recent HMRC webinar for tax agents caused great hilarity and confusion when the presenter said a weekly bacon roll (cost £2) could not be classified as a tax-free trivial benefit. But in the same webinar it was implied that wine (cost £30) could be a trivial benefit.
The root of the confusion was a misunderstanding about the conditions for a trivial benefit. Most people focus on the cost per item, but all four of these conditions must be met:
- the cost of providing the benefit does not exceed £50;
- the benefit is not cash or a cash voucher;
- the employee is not entitled to the benefit as part of any contractual obligation; and
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties.
If the employer promises to provide bacon rolls to those employees who turn up for an early training session every Friday, that amounts to a reward for performing duties connected with the employment contract (condition 4 is broken). Where the employer provides the bacon roll as an unexpected treat to employees, that can be classified as a trivial benefit as the employees don’t have to do anything in order to receive the bacon roll.
If all staff are provided with free or subsidised breakfast at the workplace, that is not a trivial benefit, but it would be tax free under the rules applying to a staff canteen (see EIM21671)
The number of trivial benefits provided to a particular member of staff in a single tax year is unlimited, but each item provided has to meet all of the four conditions above. Thus regular gifts, eg a bacon roll every Friday, may come to be expected as part of the reward for working for that employer. As soon as the benefit is expected by staff it ceases to qualify as a trivial benefit.
Where trivial benefits are provided to a director of a close company or to a member of their family or household, there is an annual cap of the value of items which can be treated as trivial benefits: £300 per year.
Written by the Tax Advice Network