The HMRC manual changes to take account of Section 323A ITEPA 2003 sets out a statutory exemption for trivial benefits. Under this exemption, 'if an employer provides a benefit to its employees, the benefit is exempt from tax as employment income if all the following conditions are satisfied:
the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person) (see EIM21865)
the benefit is not cash or a cash voucher (see EIM21866)
the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements) (see EIM21867)
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) (seeEIM21868).
Where the employer is a close company and the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year (seeEIM21869).
If any of these conditions is not satisfied then the benefit is taxed in the normal way, subject to any other exemptions or allowable deductions.'
The manuals contain useful examples and a selection are reproduced below:
Employer C provides each member of its 25 strong work-force with a bottle of wine at Christmas. The total bill comes to £1,000. This reflects 20 bottles of wine that cost £15 per bottle provided to each of its employees and 5 bottles of wine provided to each of its directors that cost £140 per bottle. In this case it is not impracticable to determine the cost of the individual benefit and the actual cost per item should be applied in determining whether the monetary limit has been exceeded for each employee and director. The benefit of the £15 bottles of wine can be covered by the exemption since the cost does not exceed the trivial benefit financial limit but not the benefit of the £140 bottles of wine provided to the directors.
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.