Your limited company is able to pay for certain celebrations and festive treats without creating a tax liability. 

Trivial benefits and staff entertainment are two of the most valuable tax breaks available to limited companies. When used correctly, you're able to reward both yourself and your employees during the festive season whilst remaining tax efficient.  

In this blog we explore what you need to know. 

• Directors of close companies can usually receive up to £300 of trivial benefits per tax year. 

• Annual Christmas parties and staff events may qualify for tax relief. 

• The £150 annual function exemption can apply to Christmas parties and other staff events. 

• Get the rules wrong and it can mean turning a tax-free benefit into a taxable one. 

A small gift or perk provided for by your limited company.  

So long as the following conditions are adhered to, the benefit is tax-free for both the limited company and the recipient. 

In order to qualify, the trivial benefit must: 

• cost £50 or less. 

• not be cash or a cash voucher. 

• not be a reward for work performed. 

• not be included in an employment contract. 

For directors operating through their own limited company, this can be particularly helpful during the festive period. 

Trivial Benefit examples 

You could gift yourself with: 

• A Christmas hamper 

• A bottle of wine 

• Theatre tickets 

• Flowers 

• Chocolates 

• Restaurant vouchers 

So long as each benefit costs £50 or less and meets the rules, it will usually qualify. 

Important! 

Most limited companies are classed as close companies. Directors are traditionally limited to £300 of trivial benefits per tax year, which is equivalent to six £50 benefits. 

One Vantage client wanted to treat both themselves and their spouse, who was also a shareholder and employee of the business. 

Instead of taking additional dividends to cover small personal treats, they used the trivial benefits exemption throughout the year. 

They provided: 

• A Christmas hamper 

• Birthday gifts 

• Restaurant vouchers 

• Theatre tickets 

Because each benefit met the rules and remained below £50, there was no additional Income Tax or National Insurance to pay. 

The festive season is also the perfect time to consider Christmas parties and staff events. 

The good news? These can often be paid for by the company. 

The Annual Function Exemption 

Your limited company can usually provide annual staff events, including Christmas parties, without creating a taxable benefit. 

The key limit is: £150 per person per tax year (including VAT). 

This value covers the total cost of the event, including: 

• Food and drink 

• Venue hire 

• Entertainment 

• Accommodation 

• Transport 

For example 

Your company hosts a Christmas meal for you and your spouse (who also works for your company). The total cost comes to £240, which is £120 per attendee. As the total value falls below the £150 threshold, the event will usually qualify for the exemption. 

• Buying gifts worth more than £50 and treating them as trivial benefits. 

• Giving cash or cash-equivalent vouchers as trivial benefits. 

• Treating performance-related rewards as trivial benefits. 

• Exceeding the £150 annual event limit. 

• Forgetting to divide event costs by the number of attendees. 

• Assuming every Christmas expense is automatically tax deductible. 

It's important not to confuse the two. 

Trivial Benefits are: 

• Individual gifts or perks 

• Usually limited to £50 per benefit 

• Up to £300 annually for directors of close companies 

• Covers items such as hampers, wine and vouchers 

Staff Entertainment is: 

• Organised staff events 

• Annual function exemption of £150 per attendee 

• Typically covers Christmas parties and celebrations 

• Can include guests 

Many directors can legitimately use both during the festive season. 

The bottom line is simple. Trivial benefits and staff entertainment are two of the easiest ways for limited company directors to enjoy company money tax-efficiently during the festive season, so long as it's handled correctly.  

A Christmas hamper, restaurant voucher, festive meal or staff celebration can often be paid for by the company without creating additional tax liabilities. 

Before the year ends, it's worth checking whether you've made full use of the available allowances. Your Vantage Client Director can help you with this.