Muras Matters: Staff Christmas Gifts

Staff Christmas Gifts


In the season of goodwill, many employers will consider making gifts to their staff but these gifts are normally subject to income tax and possibly National Insurance Contributions (“NIC”). Many employers pay the tax due on behalf of their staff through a PAYE Settlement Agreement.

This year however may be different for certain gifts as the Trivial Benefit rules took effect from 6 April 2016 so that qualifying gifts to staff are not now subject to income tax or NIC.

Trivial Benefits

As you would expect, there are a number of conditions:

  • the benefit must not consist of cash or a cash voucher (however may consist of a non-cash voucher such as a gift card);
  • the cost of providing the trivial benefit must not exceed £50;
  • the trivial benefit cannot be provided by way of a contractual obligation or salary sacrifice arrangement;
  • the trivial benefit must be given for a non-work reason e.g. birthday, Christmas or social event;
  • for close companies there is a £300 annual cap for directors and other office holders and family members but when those family members are also employees, they get their own £300 annual cap.

A close company is broadly defined as a company controlled by 5 or fewer participators, for example a company with 5 shareholders or less is a close company. Therefore, in theory, where both husband and wife are employed by the same company and owned by them, six gifts up to £50 each (£300 in total) could be provided income tax free. However, if the annual cap is exceeded then the whole of the benefit becomes taxable in the usual way.

Qualifying trivial benefits will not need to be reported to HM Revenue & Customs. If you have a query over benefits in kind, remuneration in general or for gifts ideas, please contact our Tax Director, Jenny Marks.

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