Christmas is a time for giving and what better way to reward your reliable staff and loyal customers than giving them a Christmas gift this year. Before you don the red suit and beard and fill your sack with gifts, there are a few things you should be aware of;
Business gifts to customers:
Business gifts to customers are only allowed as a tax deduction if the total cost to one individual per year is less than £50, the gift bears the company logo or an advert for your business and it isn’t food, drink or tobacco (unless samples of your products) or exchangeable vouchers.
Christmas Parties:
The cost of a Christmas party or other annual function is an allowable tax deduction for businesses. However, this doesn’t apply to sole traders or business partners of unincorporated organisations (but it will apply to their employees). There will be no chargeable taxable benefit for the employee as long as:
- The event is open to all employees, or all at a particular location if you are a multi-site operation
- The cost per head isn’t more than £150 (the average cost per head mustn’t exceed that amount throughout the year)
- VAT is recoverable on staff entertaining expenditure but not for partners so input VAT will need to be allocated.
Gifts to staff:
HMRC will consider a benefit exempt if it is deemed to be a trivial benefit. This means the gift must cost £50 or less, and not be part of the employees contract or a reward for performance. The gift cannot be cash or a cash voucher.
Vouchers:
Cash vouchers are subject to tax and National Insurance.
Christmas Bonuses:
These are subject to PAYE and NI as additional salary.