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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 
  • Jigsaws 
  • Trainers 
  • Travel pillows 
  • Clothing 
  • Sunglasses 
  • 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.