Who fancies £300 tax-free additional money per year from your business?
If you are the director of a limited company, then you could be missing out on an additional £300 per year from your business, tax-free!
There is a little-known benefit called “Directors Gifts” that HMRC doesn’t go out of its way to discuss. Why would they? But it does mean that directors of a limited company can legally take some additional money from the business, with some significant tax advantages.
Read on for more information.
HMRC State: You don’t have to pay tax on a benefit for your employee if all of the following apply:
- it costs you £50 or less to provide
- it isn’t cash or a cash voucher
- it isn’t a reward for their work or performance
- it isn’t in the terms of their contract
This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.
But don’t pay them as part of a salary sacrifice, as then they fall under P11D benefits, and different rules apply.
They also say You can’t receive trivial benefits worth more than £300 in a tax year if you’re the director of a ‘close’ company. A close company is a limited company run by five or fewer shareholders.
And this applies to many small, limited companies who have no idea they could be taking this additional payment of up to £300 per year – TAX-FREE!!
Don’t believe us? Ask your account, or check out the link to the HMRC site here: https://www.gov.uk/expenses-and-benefits-trivial-benefits
Just some of the items we have processed as directors’ gifts have included:
- Advent calendars
- Travel pillows
- Fiction books
It is worth noting that the £50 per month limit MUST include any delivery charges and VAT if applicable. So, you can’t spend £49.99 plus delivery, for example. And you can’t spend more than £300 in one year (it works out to six months’ worth of £50 each). You can take the payments whenever you choose within those 12 months.
It also must be a physical product or a voucher that must be exchanged for a physical product. So, no cash withdrawals, unfortunately.
Have you been missing out? For more information do get in touch.