Owner managed businesses (OMBs) can provide small benefits (≤ £50) to their directors and family members without incurring income tax and national insurance liabilities, providing they meet certain conditions.
This means that, as a director / shareholder of your own business, your company could give you a £50 gift voucher with no PAYE implications. For directors and office holders of OMBs, the annual exempt limit for trivial benefits is £300. This limit includes family or household members.
What conditions need to be met for a benefit to be tax-free under trivial benefits rules?
- The benefit is not cash or a cash voucher,
- The cost of providing the benefit does not exceed £50,
- The benefit must not be provided under a salary sacrifice arrangement,
- The benefit must not be provided in recognition or anticipation of work or services carried out in the course of the employment, otherwise the provision will be taxed the same as any other earnings, and
- The cost of providing the benefit should not exceed the annual exempt amount of £300, as reduced by earlier trivial benefits provided in the year plus any amounts that are allocated to the director on provision of a benefit to a member of the family or household.
The fifth condition only applies to directors and office holders of companies that are controlled by 5 or fewer persons and so the rule applies to benefits given to non-director employees within a business without the annual limit.
If you have not taken advantage of these rules previously, then you may wish to consider doing so before the end of the tax year. The numbers involved are reasonably small, but opportunities to save tax are rare, so why look a gift horse in the mouth?
The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice. No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.