With Christmas fast approaching many Company Directors want to thank and reward their staff for their hard work. For limited companies, there are certain tax benefits on staff annual and Christmas parties and giving gifts to employees.
Tax free staff Annual and Christmas parties
For any annual event, be it a summer BBQ or Christmas Party, HMRC provides a tax relief for all employees set at £150 per head. The total claim for any annual events combined requires being below the £150 limit to qualify per employee.
How to calculate the cost per head?
The cost per head for the whole event from start to finish can include;
- taxis home
- overnight accommodation
If the VAT, inclusive of cost of the event is over the £150 limit the whole benefit is taxable as a benefit in kind. To calculate the cost per head of your annual or Christmas party, divide the total cost of the function by the number of employees.
Can you bring a guest?
The events are mainly for entertaining employees. If the company has several branches then the event is open to all staff in their location. The £150 threshold is per employee and is split between any employees’ partners or guests who attend too. The cost of the whole event is an allowable expense for your business.
Can you invite suppliers or customers?
When inviting customers or suppliers to the Christmas party, VAT relief may be restricted as non-employees are also being entertained. Event’s for only directors, partners or sole proprietors, will not be tax deductible as all employees are required to be invited for it to qualify.
What gifts can you give that are tax allowable?
Employers can give gifts listed below to employees as tax deductible, trivial benefit, as long as it does not exceed £50.
- a bottle of wine
- a box of chocolates
Unfortunately, a hamper with food and wine will not be classed as a trivial benefit. Christmas presents paid in cash to staff are taxed as earnings with tax and national insurance. This also applies with gift vouchers in excess of £50 which are exchangeable for goods and services too.
Record keeping for your annual and Christmas parties
For all events, keep the receipts. By make a note of the employees who attended keeps records organised too.
From Loucas we hope you enjoy your Christmas festivities and that your employees also enjoy their seasonal gifts.
Have a great time.
For more advice on trivial benefits read more on trivial benefits and what they are?