In the UK, directors of a ‘close’ company can receive up to £300 worth of trivial benefits per director, per tax year, completely tax-free. A close company is a limited company typically run by five or fewer shareholders, who are also often the directors.
Conditions for Trivial Benefits
To qualify for the exemption, each individual benefit must meet all of the following criteria:
- The cost of the benefit is £50 or less (including VAT). If it costs even a penny over, the whole amount becomes taxable.
- It is not cash or a cash voucher (retail gift cards are permissible as they can’t be exchanged for cash).
- It is not a reward for work performance or part of the director’s employment contract.
- It is not provided as part of a salary sacrifice arrangement.
Key Points for Directors
- Annual Cap: The total value of all trivial benefits for a director (and any non-employee family or household members) cannot exceed £300 in a single tax year.
- Per Director/Employee: The limit is per person. If a director’s family member is also an employee of the same company, they have their own separate £300 annual cap (if a director of the close company) or no annual cap (if a regular employee).
- No Reporting: Qualifying trivial benefits do not need to be reported on forms P11D or P11D(b), which significantly reduces administration.
- Examples: Common examples include a bottle of wine, a box of chocolates, a gift card for a shop, or a meal out to celebrate a birthday (as long as it’s not a performance bonus).