Clients have been asking us about what can and cannot be claimed against tax as we approach the festive season. We have prepared a Factsheet and thought we would share to our fellow Chamber members, the contents of which below:
If you provide gifts to your staff such as a bottle of wine, chocolates, flowers etc there are no tax implications
providing that the gift is considered to be ‘trivial’ by HMRC. However, cash gifts and gift vouchers which can be converted to cash are excluded from this.
There is no specific value that constitutes a ‘trivial’ gift, but it is thought to be up to approximately £30 - £40 per member of staff up to the HMRC maximum of £50. Owner managers are further subject to an annual cap of £300 in total for the year on gifts to themselves or employees who are members of their family.
If the gift exceeds £50, it will be taxable and it will need to be reported to HMRC on either a form P11D or through a PAYE Settlement Agreement.
Providing gift vouchers to your staff which are convertible to cash or are more than £50 per employee, is, unfortunately, taxable one way or another. You can either declare the vouchers on each employee’s form P11D so that they pay the associated tax and national insurance or you can set up a ‘PAYE Settlement Agreement’ with HMRC which will arrange for the tax and national insurance bill to be sent to the employer.
Staff annual functions (eg. Dinner dance or Christmas party ) are tax-free where the total cost per person attending is not more than £150 per year ( including VAT ). Main points to consider:
The £150 exemption includes VAT
All costs paid for by the business must be included in the total figure including taxis or travel to
Additional guests (family members or clients) costs must also be included in the calculation
If you spend more than £150 per person the entire amount is a ‘benefit’ and must be declared on the
The VAT incurred on the cost of a Christmas party for your staff is recoverable, however, the definition of employees for VAT purposes does not include partners or existing staff or former employees, so if your party includes guests then the VAT is not recoverable as it’s not deemed to be for a business purpose. As an alternative, you may just work out the appropriate apportionment of VAT recovery on the Christmas party costs to reflect the element that relates to staff only. If partners of staff or clients were charged a nominal amount to attend the Christmas party then the VAT would still be recoverable but the output VAT amount charged must be accounted for in your VAT return.
Should you have any queries or would like more information on any particular “perk” you are thinking of giving your customers and you would like clarification, then just give us a call on either 01604 678470 (Sywell office) or 01933 312950 (Rushden office).