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Section 323A(4) ITEPA 2003

Note: this guidance has effect for benefits provided from 6 April 2016 onwards. For guidance on HMRC’s approach to trivial benefits for tax years 2015 to 2016 and earlier, see EIM21860.

»Ê¹ÚÌåÓýapp guidance at EIM21864 sets out the qualifying conditions that determine whether or not a benefit provided to an employee is exempt from tax as a trivial benefit.

One of the conditions that has to be satisfied is that the cost of providing the benefit does not exceed £50. If the cost of providing the benefit exceeds £50, the full amount is taxable, not just the excess over £50.

In determining the cost of the benefit for the purposes of the exemption, as for benefits in kind more generally, use the VAT inclusive amount (see EIM15525).

»Ê¹ÚÌåÓýapp cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial.

Usually it will be obvious what the cost of providing the benefit is. However, on occasions an employer will provide a benefit to a group of employees and it is impracticable to establish what the precise cost is per person. In such cases, when determining whether the monetary limit has been exceeded you should take the average cost per person of providing the benefit.

Where the benefit consists of more than one item then the cost of providing the benefit is the total cost � for example if an employer provides a birthday gift consisting of a bottle of wine costing £10 and a box of chocolates costing £5, the total cost of providing the benefit is £15.

In determining whether the average cost method should be applied, you should apply common sense, bearing in mind the circumstances, in deciding whether it is appropriate.

»Ê¹ÚÌåÓýapp following examples illustrate a number of scenarios:

Example A

Employer A takes a group of employees out for a meal to celebrate a number of birthdays. Five employees attend the meal at a total cost to employer A of £240. Individual employees make different menu and drink selections. Rather than undertake a detailed analysis of the bill you should accept that the cost per head is £48, reflecting an average amount of £240/5. »Ê¹ÚÌåÓýapp benefit of the meal can be covered by the exemption since the cost for each individual does not exceed the trivial benefit financial limit.

Example B

Employer B provides each of its 100 employees with a turkey at Christmas and the total bill comes to £4,500. »Ê¹ÚÌåÓýappre are a variety of sizes. Because the employer has made a bulk order, the turkeys have not been priced up individually but would cost in the region of £40 to £60 each. Employees are able to choose which bird they have. Rather than undertake a detailed analysis of the individual benefits, you should accept that the cost per head is £45, reflecting an average amount of £4,500/100. »Ê¹ÚÌåÓýapp benefit can be covered by the exemption since the cost for each employee does not exceed the trivial benefit financial limit.

Example C

Employer C provides each member of its 25 strong work-force with a bottle of wine at Christmas. »Ê¹ÚÌåÓýapp 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. »Ê¹ÚÌåÓýapp 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 the benefit of the £140 bottles of wine provided to the directors cannot be covered by the exemption.

Example D

Employer D gives an employee a gift card, which costs the employer £10 to provide. »Ê¹ÚÌåÓýapp employer tops up the employee’s gift card on 7 further occasions, at a cost of £10 for each occasion. Although the benefit to the employee is topped up on separate occasions there is a single benefit of the provision of a gift card. »Ê¹ÚÌåÓýapp total cost to the employer for providing the benefit over the period of employment is £80 and therefore this benefit is not exempt as a trivial benefit.

Example E

Employer E is a wine producer and without obligation provides each of its employees with an allowance of wine from the staff shop every month. This started at the end of January 2017 and costs the employer £10 per employee each month. During the 2016/17 tax year the total cost to the employer of the benefit is £30 per employee and so the trivial benefits exemption can apply for that tax year. After a poor harvest during 2017/18, Employer E decides to stop the allowance after October. »Ê¹ÚÌåÓýapp total cost of the benefit for 2017/18 is £70 per employee. »Ê¹ÚÌåÓýapp cost condition is not satisfied so the trivial benefits exemption does not apply for 2017/18 and the benefit must be declared in the normal way for that year.

Example F

Employee F is allowed to charge a privately owned electric car at work and does so. »Ê¹ÚÌåÓýapp electricity used in each charge costs between £2 and £5, depending on the level of charge required. »Ê¹ÚÌåÓýapp employer allows the employee to charge their car most days when they come to work. »Ê¹ÚÌåÓýappre is a benefit of the provision of electric charging. As the opportunity to charge the electric car is open ended the total cost of the benefit is likely to exceed the trivial benefit limit so the benefit is not likely to be exempt under section 323A ITEPA 2003. Provision of the charging facilities might also be part of the employee’s employment terms and conditions which would also prevent the exemption from applying.

However, for the tax year 2018/19 and subsequent tax years, an exemption for a benefit in the form of vehicle battery charging at or near the employee’s workplace may apply (subject to the conditions under section 237A being met). See EIM01035.