Thinking of giving the Tax Man a gift this Christmas?
…I didn’t think so!
As Christmas draws closer, most people in work are looking forward to their much deserved time off, and, of course, the Christmas Party! To keep up the festive cheer, the tax man is offering tax exemptions to businesses of all sizes for employee entertainment. To obtain the exemption, the event must meet certain criteria, as follows:
- Be an annual event, such as a Christmas Party
- Be open to all employees
- Cost less than £150 per head (inc. VAT)
If the event meets the criteria above, the good news for the employer is that it would qualify as deductible business expense, reducing the taxable profits of the company, and therefore the tax payable. Further good news is that it will not result in any further reporting requirements or tax implications for the employee.
It is important to note that if the event costs more than the £150 figure per person, then no exemption is available.
Considering Gift Giving? (Minus the Tax Man)
As an employer, giving gifts to your staff is tax allowable! However, there are still things to bear in mind. Depending on the value of the gift, the employee may still get taxed on the value of the gift as a benefit in kind, and you too may have to pay Class 1A NI on that value.
To keep the Tax Man’s fingers off your staff gifts, he does consider some small items to be trivial benefits which can be given as tax-free gifts to staff. These can include seasonal gifts such as a turkey, an ordinary bottle of wine, or a box of chocolates.
If you are feeling extra generous this Christmas and intend to give larger gifts to your staff, then you can pay the tax and NI due on the cost of the gift, on behalf of the employee, through a PSA (PAYE Settlement Agreement) with the tax office.
So remember, if you’re feeling that extra bit generous this Christmas, think of the tax man’s gift!