Festive Tax Tips

Date: 30th November 2017

With Christmas approaching, it’s time to be thinking about client gifts, staff parties and decorating the office. But it’s also time to consider how much of this unusual expenditure is tax-free. Most companies are confused about what they can and cannot legitimately spend. Here is our quick summary - for more detailed guidance please call us.

Festive Tax Tips Oaktree Accountants Andover

Staff parties

A staff Christmas party or an annual festive function will qualify as a tax-free benefit for your employees providing that it meets various conditions, the most important being that the total cost does not exceed £150 per head, per year. The £150 includes everything – transport, accommodation, VAT, etc… And the £150 is a limit, not an allowance you can add to; in other words, if you go over £150, the whole benefit is taxable.

The nature of the event is also important – it must be primarily for entertaining staff; it should be for all staff – or all staff in one location – and not limited to directors, unless all of your staff are actually directors.

If these conditions are met, then the cost of the whole event is an allowable expense for your business.

Can I buy my employees gifts?

Christmas presents paid in cash to employees will always be taxable along with other earnings. The same treatment also extends to vouchers that can be spent in shops of the employee’s choice. The employee has to pay tax on the full value of the voucher.

If employees are given a seasonal present, such as a turkey, an ‘ordinary’ bottle of wine or a box of chocolates, as long as the cost is reasonable, HM Revenue & Customs (HMRC) won’t seek to tax it.

Unfortunately, HMRC will not tell us what monetary limit it considers as ‘trivial’ but in our experience, less than £50 a head is usually acceptable. If the value of the gift is more than this, it will be taxable and should be included on the employee’s P11D.

Can I buy my clients gifts?

Yes! It’s Christmas time and as an employer you may want to show your appreciation for your clients or customers with a Christmas card and/or present. Sending a Christmas card will fall under ‘office expenses’ and is a tax deductible expense.

As for presents, you can also send your clients or customers a small promotional gift as these are tax deductible, as long as those gifts clearly promote your business and incorporate a conspicuous advertisement for your business. They should cost no more than £50 each over the accounting period. However gifts of food, drink, tobacco or of any token or voucher exchangeable for goods are excluded. Sending non-promotional gifts to clients or customers is classed as entertaining by HMRC and is therefore NOT tax deductible.

 

This blog can only summarise the tax position around these various issues. For more detailed guidance on your specific situation, please do not hesitate to contact us.  And Season’s Greetings!!

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