The trivial benefits legislation provides a simple and practical tax exemption that allows employers to give small non-cash benefits to employees without triggering tax or National Insurance charges.

To qualify as a trivial benefit, the cost to the employer must not exceed £50 per item. The benefit must not be cash or a cash voucher and must not be provided as a reward for work or as part of the employee’s contractual entitlement. It must also not be provided in recognition of particular services performed. Typical examples include modest gifts such as flowers, a bottle of wine, a meal voucher or a small seasonal gift.

Where these conditions are met, the benefit is exempt from Income Tax, employer’s and employee’s National Insurance and does not need to be reported to HMRC.

For directors of close companies, an additional annual cap applies. Such individuals are limited to £300 of trivial benefits per tax year, calculated as an aggregate of qualifying items. This limit does not apply to ordinary employees.

The rules are designed to reduce administrative burdens and provide clarity, but care is needed. Regular provision of benefits, or benefits that appear linked to performance, can fall outside the exemption.

Used correctly, trivial benefits offer a straightforward way for businesses to reward staff in a tax-efficient and low-compliance manner.

While company cars often come with tax implications, there are specific situations where the associated benefits may be exempt. There are circumstances where it can be possible to offer employees car benefits that are exempt from tax.

Exempt expenses and benefits include the following:

• Business-only use: This rule has been the subject of much case law over the years, but it has generally been established that to qualify for VAT recovery the car must not be available for any private use. This means that the car should only be available to staff during working hours for employment related duties or to travel to a temporary workplace. The business must also clearly tell their employees not to use the vehicle for private journeys and check that they don’t.
• Adapted vehicles for disabled employees: These cars are exempt if the only private use is for journeys between home and work and for travel to work-related training.
• Fuel paid by employees: The fuel benefit is removed when an employee pays for all their private fuel use or if the employer pays and the employee reimburses the amount (during the tax year).
• ‘Pool’ cars: Employers are not required to pay or report on 'pool' cars. These are cars that are shared by employees for business purposes only and normally kept on your premises. Employers must ensure the ‘pool’ car rules are properly adhered to.
• Privately owned vehicles: Employers do not have to pay anything on cars that directors or employees own privately.

Proper documentation and compliance are required in order to maintain these exemptions.