Tax

Unreported Property Income

2 min read

Landlords in receipt of rental income in excess of £1,000 in a tax year are required to disclose this to HM Revenue and Customs (HMRC).

For various reasons rental income may not be declared sometimes landlords may simply not get round to it or perhaps are unaware that they have tax obligations.

If you become aware of undisclosed income it is always better to come forward to HMRC rather than wait until they catch up with you.

This article looks at the sources available to HMRC to identify undisclosed rental income and the Let Property Campaign which allows arrears of rental income to be disclosed in a simple cost effective manner.

HMRC have various sources to identify undisclosed rental income.

Stamp Duty Land Tax (SDLT), Land Registry and Electoral Register

SDLT is a department of HMRC and they also have access to HM Land Registry records. In both cases, HMRC are able identify, those that own multiple properties which will create a red flag if there has not been any rental income declared.

The electoral registry can also be used to identify who is living in a property.

Letting Agents

Many Landlords rent through a letting agent or use one to find tenants.
High street letting agents are required to make an annual report to HMRC identifying landlords, rental properties and income earned. Online agents such as Air BnB and other online holiday agents will provide details of their electronic payments to HMRC in an annual report.

Security Deposit

The Landlord is normally required to place any security deposit with a government approved deposit scheme. HMRC have access to these records and use them to confirm a rental agreement is in place.

Informants

Ex-spouses/partners, neighbours, colleague and disgruntled tenants have long been a rich source of information for HMRC.

The Let Property Campaign

Help is at hand for Landlords wishing to bring their affairs up to date. The facility allows all undeclared years to be disclosed on one form, penalties will be lower. It will normally be possible to arrange payment of the liabilities in instalments.

How we can help

We offer a wide range of business advisory services to help you make the right decisions for your business to grow and improve.

If you would like to know how Loucas can assist you, please do not hesitate to contact us.

Covid-19: The tax implications of working from home

2 min read

Employees who work from home due to measures to control the coronavirus pandemic are covered by home-working expenses rules, HMRC has confirmed. Many of us are now working from home as offices are closed during the COVID-19 pandemic. This can mean additional expenditure for both employers and employees.

What tax reliefs are available?

Employer Reimbursed costs

Employers can make payments to employees to cover the reasonable costs of working from home.

Payments of fixed amounts of £6 per week or £26 per month can be paid tax free.

In order to qualify the employee must work at home regularly as part of a homeworking arrangement.

HMRC have confirmed that during the COVID-19 pandemic employees working from home because their office is closed or if they are following advice to self-isolate will meet these requirements.

Other working from home considerations

Alternatively the employer can reimburse the actual increased costs of working from home but this can be onerous to calculate and to evidence.

If an employee does not have internet access and needs this to work from home the employer can reimburse the costs of the internet connection tax free.

An employer can also purchase office equipment and furniture for an employee. Provided there is no significant private use there will be no taxable benefit in kind.

Prior to the COVID-19 pandemic an employee would be taxed on monies received if they had purchased office equipment and then been reimbursed by their employer. However, a temporary tax exemption has now been made for such reimbursements.

Relief for Employee Costs

If the employer does not pay the fixed amounts for use of home costs  it is possible for employees to make a claim for tax relief using the same scale rates of £6 per week or £26 per month. Again the actual additional expenditure can be claimed with the suitable evidence.

The relevant expenditure is additional heating and light costs and metered water

In addition an employee can also claim the cost of any extra phone costs due to business calls.

Claims for relief by an employee for the cost of office equipment that is not reimbursed by an employer should be approached with caution. To qualify costs have to relate to equipment used in the performance of an employee’s duty. Items such as desk and chair would arguably not qualify as they put you in a positon to perform your duties.

Additionally, HMRC will only accept a claim for computer equipment in limited circumstances as they would normally expect the employer to supply such equipment or at least make it available if it was necessary for the role.

If you are unsure on the tax treatment of working from home, or have any other employment tax queries, our team of expert Accountants would be happy to assist.

Stay up to date with the latest news. Read more on tax exemptions for home office expenses here.

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. Each comment posted by third party readers/subscribers of our website on topics of tax and accounting is their personal opinion and due professional care should be taken by you before you act after reading the contents of that post. No warranty whatsoever is made that any of the posts are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

Budget Highlights

2 min read

Chancellor Rishi Sunak unveiled his first budget on 11 March 2020. Our summary focuses on the range of tax and financial measures which may affect you.

Entrepreneurs’ relief lifetime allowance reduced to £1m

It had been widely reported that the chancellor would abolish the generous relief where gains on certain qualifying shares and business assets are only taxed at 10%. Instead the lifetime limit on gains that can attract the relief has been reduced from £10M to £1M. In effect we have come full circle as Gordon Brown introduced the relief with a £1M limit in 2008.

Pension tapered annual allowance raised

The chancellor has raised the pension tapered annual allowance threshold in response to reports that senior medical NHS staff were restricting their hours due to large, and often unexpected, tax bills being incurred.

From 2020/21 the threshold income at which the tapered annual allowance needs to be considered is being raised from £110,000 to £200,000.

Many higher earners will now be able to take advantage of the full £40,000 annual allowance for pension contributions.

Various new measures in response to Coronavirus

New measures announced included the following:-

A £3,000 cash grant for businesses that qualify for small business rates relief

100% discount on business rates for retailers and businesses in the hospitality and leisure sectors where the rateable value of the property is less than £51,000

A dedicated helpline (0800 0159 559) for companies and self-employed individuals who are concerned about meeting tax payments due to the Coronavirus.

The government will repay statutory sick pay paid for absences due to the Coronavirus. The refund is available to employers with fewer than 250 employees and covers absences of up to 2 weeks.

Our comprehensive Budget Summary outlines the key measures, including some of the less-publicised changes that may impact upon your business or personal finances. For a detailed overview of the 2020 Budget information, please read our 2020 Budget Summary.

How we can help

For any help or assistance with areas of taxation, business growth or development please contact us for advice.

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. Each comment posted by third party readers/subscribers of our website on topics of tax and accounting is their personal opinion and due professional care should be taken by you before you act after reading the contents of that post. No warranty whatsoever is made that any of the posts are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

Capital Gains Tax

2 min read

Previously, disposals of UK residential properties are reported and any capital gains tax (CGT) calculated through your Self-assessment Tax Return.  The tax is therefore due for payment on the 31st January following the tax year of disposal.

What is changing?

This will all change for disposals of UK residential property after 6th April 2020 (the date of disposal is normally deemed to be the date of exchange). For these disposals, they must be reported to HM Revenue and Customs and the Capital Gains Tax paid within 30 days of the date of completion via the Capital Gains Tax on UK residential property service.

There is an exemption for the disposals where there is no tax to pay. Typically, these include properties that are covered by the main residence exemption; gains within the individual’s capital gains exemption or where there are losses from earlier capital disposals that reduce the gain below the exemption.

It is therefore vital to start collating information to compute the gain as soon as a disposal is anticipated.  In some cases, a disposal may require professional valuations to be obtained.

CGT liability

There are penalties for late filing of the information and payment of the Capital Gains Tax which follow the same rules as for self-assessment.

For those that do not normally file a Self-assessment Tax Return, there would be no need to do so in respect of the disposal. For those that do, they will need to disclose the gain on the Self-assessment Return as well.

When filing through the Capital Gains Tax in UK residential property service the tax payable is, in many cases, likely to be an estimated as it is not known the total income will be for the year or there may be later capital disposals the at affect the amount payable. The tax is therefore treated as a payment on account of the final liability which will be finalised either as an amendment via new service or disclosure of the final position on a self-assessment Tax Return.

The new rules apply to individuals, personal representatives and trustees.

How we can help

We are always on hand to answer any questions you may have about Capital Gains Tax. We can advise as to the best course of action in your own particular circumstances, so please do contact us.

Disclaimer: Content posted is for informational & knowledge sharing purposes only, and is not intended to be a substitute for professional advice related to tax, finance or accounting. Each comment posted by third party readers/subscribers of our website on topics of tax and accounting is their personal opinion and due professional care should be taken by you before you act after reading the contents of that post. No warranty whatsoever is made that any of the posts are accurate and is not intended to provide, and should not be relied on for tax or accounting advice.

 

HMRC delays the introduction of off-payroll rules to the private sector

3 min read

The reforms will shift the responsibility for assessing employment status to the organisations employing individuals. The rules would have applied to contractors working for medium and large organisations in the private sector, and were due to come into effect on 6 April.

Steve Barclay, Chief Secretary to the Treasury, stressed that the introduction of the rules has simply been delayed, rather than cancelled. The rules will now take effect on 6 April 2021. 

In a statement, HMRC said: ‘This is part of additional support for businesses and individuals to deal with the economic impacts of COVID-19. 

‘This means that the different rules that exist for inside and outside the public sector will continue to apply until 6 April 2021.’ 

The off-payroll rules have applied to the public sector since 2017 and, following a review of the proposed changes earlier in the year, were to be amended to include intermediaries supplying personal services in the private sector.

Commenting on the delay, Andy Chamberlain, Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), said: ‘The government has done the sensible thing by delaying the changes to IR35 in the private sector.

‘This is a sensible step to limit the damage to self-employed businesses in this grave and unprecedented situation, but we also urge the government to do more. It must create an emergency Income Protection Fund to keep the UK’s crucial self-employed businesses afloat.’

The ‘Intermediaries Regulations’

The Intermediaries Regulations, also known as IR35, apply to individuals who provide their personal services via an ‘intermediary’. An intermediary may be another individual, a partnership, an unincorporated association or a company; however, the most common structure is a worker providing their services via their own company – known as ‘personal service companies’ (PSCs). 

The rules are specifically designed to prevent the avoidance of tax and national insurance contributions (NICs) by those using PSCs and partnerships. The rules do not stop individuals selling their services through either their own PSC or a partnership. However, they do seek to remove any possible tax advantages from doing so. Instead of allowing contractors to extract taxable profits as dividends, thereby avoiding income tax and NICs, they would need to be paid as if the payment is a salary.

The IR35 rules apply to individuals who would be classed as employees, rather than self-employed, if they supplied their services as an individual rather than through their PSC.

HMRC has made a tool known as the ‘check employment status for tax’ (CEST) tool. This is available for organisations that need to determine who IR35 applies to. https://www.gov.uk/guidance/check-employment-status-for-tax

Changes to private sector contractors

In 2017, HMRC introduced new off-payroll rules to the public sector, which saw some contractors’ net income cut significantly. The rules shifted the responsibility for IR35 compliance from the individual contractor to a public body or recruitment agency. It is intended that similar rules are applied to the private sector.

The effect of these rules will be:

  • the medium or large business (the end user) will asses the status of the PSC. They will then inform the contractor (and agency paying the PSC if applicable) or their determination and reasoning. The PSC/Agency has a right to appeal the decision.
  • If the PSC is deemed to be within IR35, the medium or large business (or an agency paying the PSC) will calculate a ‘deemed payment’ based on the fees the PSC has charged for the services of the individual
  • generally, the entity that pays the PSC for the services must deduct Pay as You Earn (PAYE) and employee NICs as if the deemed payment is a salary paid to an employee
  • the paying entity will have to pay to HMRC not only the PAYE and NICs deducted from the deemed payment, but also employer NICs on the deemed payment 
  • the net amount received by the PSC can be passed on to the individual without the company deducting any further PAYE and NICs.

Going forward

Chancellor Rishi Sunak has promised that penalties for IR35 breaches will not be ‘heavy handed’ during the first year of the implementation of off-payroll rules to the private sector. Mr Sunak said that there will be a soft-landing penalty period where HMRC will allow organisations to adjust to new measures.

Commenting on IR35, Mr Sunak said:

‘We are shortly to publish a review of how it should be implemented with some tweaks and improvements to ensure that the transition is as seamless as possible. ‘I can also tell you that I have spent time with HMRC to ensure that they are not going to be at all heavy handed for the first year to give time to adjust as well, which is an appropriate thing to do.

‘What IR35 does is change the balance, so instead of people making the assumptions about how they should be taxed, we put the onus on the company to make that assessment for them.’

How we can help

We are always on hand to answer any questions you may have about off-payroll working. We can advise as to the best course of action in your own particular circumstances. If IR35 does apply to you we can help with the necessary record keeping and calculations so please do contact us.

Business Asset Disposal relief (Previously known as Entrepreneur’s Relief)

2 min read

Business Asset Disposal Relief, is available for those in business, which may reduce the tax rate on the first £1 million of qualifying lifetime gains to 10%.

This is targeted at working directors and employees who own at least 5% of the ordinary share capital of the company and the owners of unincorporated businesses.

BADR is available to individuals on the disposal after two complete qualifying years of:

  • all or part of a trading business carried on alone or in partnership
  • the assets of a trading business after cessation
  • shares in the individual’s ‘personal’ trading company
  • assets owned by the individual used by the individual’s personal trading company or trading partnership where the disposal is associated with a qualifying disposal of shares or partnership interest.

New 5% rules for company shareholders

To qualify for BADR, the company needs to be an individual’s personal company where the individual must:

  • be a company employee or office holder
  • hold at least 5% of the company’s ordinary share capital and
  • be able to exercise at least 5% of the voting rights.

For disposals on or after 29 October 2018, they must also satisfy one of the following tests:

  • a distribution test – an individual is entitled to at least 5% of the company’s profit available for distribution to equity holders and 5% of the assets available for distribution to equity holders in a winding up; or
  • a proceeds test – an individual is entitled to at least 5% of the proceeds in the event of a disposal of the whole of the ordinary share capital of the company.

Thought should be given to the structure of your company at the outset to ensure that the tax benefits of Business Asset Disposal Relief are not lost.

Investors’ Relief (IR)

If you do not meet the criteria for Business Asset Disposal Relief (BADR) you may still be able to take advantage of the ow 10% rate of tax through IR.

IR is available to external investors (other than certain employees or officers of the company) in unlisted trading companies. To qualify for the 10% CGT rate under ‘investors’ relief’ the following conditions need to be met:

•        shares must be newly issued and subscribed for by the individual for new consideration

•        be in an unlisted trading company, or an unlisted holding company of a trading group

•        have been issued by the company on or after 17 March 2016 and have been held for a period of three years from 6 April 2016

•        have been held continuously for a period of three years before disposal.

An individual’s qualifying gains for IR are subject to a lifetime cap of £10 million.

Talk to us about your BADR planning

Loucas can help you to build a tax-efficient financial plan that ensures you are making the most of the reliefs and allowances available to you. 

If you would like to discuss any of the issues raised in this guide please call 01622 758257 or contact us.

End of Year Tax Planning Tips

By Stuart Shaw

3 min readWith less than a month left of the current tax year, it is time to consider end of year tax planning opportunities.

Pension and Gift Aid contributions

Pension contributions and gift aid contributions made prior to the end of the tax year can help mitigate your tax liabilities – even more so when your income is near certain thresholds. For example, your personal allowance is reduced by £1 for every £2 that your income exceeds £100,000. This means that for the income band from £100,000 to  £123,700 the effective rate of tax is an eye-watering 60%. The flip side to this is that if your income is within this band you will get tax relief on pension contributions and gift aid payments at 60%.

Another scenario where additional relief is available is in respect to the withdrawal of child benefit. This occurs when the highest earner in the household’s income exceeds £50,000 and the benefit is clawed back at a rate of 1% for every £100 of income in excess of £50,000. The benefit is fully withdrawn when the individual’s income exceeds £60,000. Pension contributions and gift aid payments within this band of £50,000 and £60,000 will, therefore, attract a higher rate of effective relief. The rate of relief will depend on the number of children you are claiming benefit for.

Tax Efficient Investments

The end of the tax year is the perfect time to consider making tax efficient investments:-

ISAs

A range of ISAs are available to savers, including the Lifetime ISA for those under the age of 40; the Help to Buy ISA for first-time homebuyers; and the Junior ISA for individuals aged under 18.

Savers are able to invest in any combination of cash or stocks and shares, up to the overall annual subscription limit of £20,000. An individual may only pay into a maximum of one Cash ISA, one Stocks and Shares ISA, one Help to Buy ISA, one Lifetime ISA and one Innovative Finance ISA

Venture Capital Trusts (VCT)

These are investment vehicles that are invested in small higher-risk trading companies.

Investments in VCTs attract an income tax relief of 30% of the amount invested. This tax relief will be recouped if the investment is sold within 5 years.

Dividends and capital gains are tax-free.

The maximum annual investment for a taxpayer is £200,000.

EIS/SEIS

These are tax advantaged schemes that involve direct investments into small higher-risk trading companies.

EIS shares attract income tax relief of 30% and SEIS shares attract income tax relief of 50%. The relief is clawed back if the shares are sold or if there is a disqualifying event within 3 years.

Any gains on the shares are tax-free provided they are held for a minimum of 3 years and in most cases are fully relieved from Inheritance tax if held for two years.

In addition to the above, capital gains tax on gains invested in EIS shares where the relevant disposal was either 36 months prior to or 12 months after the EIS investment can be deferred until the subsequent disposal of the EIS shares.

The maximum that can be invested in EIS shares annually is £1M (or £2M for knowledge intensive companies) and for SEIS shares the limit is £100,000.

Inheritance Tax (IHT)

There is an annual £3,000 IHT gift exemption and you can also utilise any unused exemption from the previous year. Gifts covered by the exemption will fall outside of your estate immediately for IHT purposes.

There is also a £250 small gift exemption which allows you to give up to £250 annually to any number of friends and family. Again qualifying gifts will fall out of your estate immediately for IHT purposes.

Gifts to individuals that are not covered by the exemptions are potentially exempt transfers and you would have to survive the gift by seven years for them to fall outside your estate.

Capital Gains Tax

Each individual has a capital gains tax exemption of £11,700 for the year ended 5 April 2019. If it is not utilised then it is lost.

If you have investments standing at a gain you may wish to you consider making an appropriate disposal to utilise the annual exemption.

Alternatively, you may have already made gains in excess of the annual exemption and look to crystallize a loss prior to 5 April to offset against the gain.

Care should be taken if you are looking to bed and breakfast a share (i.e. sell the holding and then repurchase it shortly afterwards). If you repurchase the share within 30 days of the disposal then this purchase is matched with the recent disposal for tax purposes so is unlikely to crystallize a gain or loss as intended.

You could still dispose of a shareholding then immediately have your spouse purchase the same shareholding or alternatively, a SIPP could purchase the shares if you have one.

Loucas can help you to build a tax-efficient financial plan that ensures you are making the most of the reliefs and allowances available to you.  If you would like to discuss any of the issues raised in this guide please call 01622 758257.

Self Assessment Tips and Advice

4 min read

Self assessment tax returns can be complicated, with many tax payers struggling to complete these correctly. A recent study found that 735,258 tax returns in January 2020 were submitted less than 24 hours before the self-assessment filing deadline at midnight 31st January.

Legislation changes frequently, meaning that taxpayers risk paying too much tax and/or incurring penalties through failing to get things right.

As more information moves online, and tax becomes more digital, taxpayers may increasingly need help in understanding their obligations, ensuring that the information HMRC holds about them is correct and meeting the increased filing obligations.

Do I need to complete a Tax Return?

The Self Assessment deadline of 31st January 2022 for filing a 2021 Tax Return is fast approaching. The 2020 Return covers the period 6 April 2020 to 5th April 2021.

So how do you know if you should complete a Tax Return ?

If any of the following were applicable to you then you may be required to register for Self Assessment and complete a Tax Return:

  • Were self employed or a partner in a partnership business.
  • Were a company director and received non PAYE income from the company.
  • Had income over £100,000.
  • Received more than £10,000 from dividends or investment income.
  • Received rental income.
  • Had foreign income.
  • You or your partner earned over £50,000 and claimed child benefit.
  • Made a capital gain on the sale of an asset.

HM Revenue & Customs have developed a useful online check which will also help you decide whether or not you need to complete a Tax Return.

If you discover you need to file a Tax Return, the first step is to register for Self Assessment.  The easiest way to do this is through HMRC’s website.  Shortly after registering, HMRC will issue you with a tax reference number (UTR).  You will need your UTR to file your Return.

If you miss the Self Assessment deadline then an automatic penalty will be issued, whether or not you actually owe any tax. Our team of knowledgeable Accountants are on hand to help you. Reach out to us on 01622 758257 or email enquires@loucas.org.uk

How to spread the payment of your Self Assessment tax liability

Your Self Assessment liability has to be paid by 31 January following the end of the tax year, with a possible 2nd payment due on 31 July depending on what your liability is.

There are a number of different methods you can use to actually make the payment, details of which can be found on the HM Revenue & Customs’ website.

As any alternative to actually making the payment in a lump sum, you can spread payment of your Self Assessment liability over twelve months through your PAYE tax code as long as all these apply:

  • you owe less than £3,000 on your tax bill
  • you already pay tax through PAYE, for example you’re an employee or you get a company pension
  • you submitted your paper tax return by 31 October or your online tax return online by 30 December

If you find yourself in a position were you are unable to pay your liability, you should contact HMRC’s Business Payment Support Service as soon as possible, ideally before the payment deadline.  You may be able to agree an instalment plan to settle the debt over a period of time and whilst interest may still be payable, you should be able to avoid the penalty charges.

If you do not agree a payment plan and fail to settle your liability in full by the due date interest will be charged and if paid more than 30 days late a 5% surcharge will be issued.

Reducing your payments on account

Payments on account are payments made towards your eventual Income Tax and Class 4 NIC liability.

Each payment is based on half your previous year’s tax bill and are payable by 31 January and 31 July following the end of the tax year.

You have to make the payments on account every year unless:

  • your last Self Assessment tax bill was less than £1,000
  • you’ve already paid at source more than 80% of all the tax you owe

If you believe your tax bill will be lower than in the previous year, you can ask HMRC to reduce your payments on account.

This can be done through your online digital account or by completing form SA303.

It is possible to reduce the payments on account at anytime, even after the first payment has been made.  This will result in any over payments being refunded.

It should be noted that if you reduce down your payments on account lower than they should have actually been this will result in interest being charged.

You can find out more information about our personal tax services here.

Missed Deadline

HM Revenue and Customs (HMRC) must receive your tax return and any money you owe by the deadline midnight 31st January 2022. You’ll usually pay a penalty if you’re late submitting your tax return. You can appeal against a penalty if you have a reasonable excuse.

If you do not pay the tax you owe for the previous tax year on time, the more you delay, the more you will be required to pay. This is why it is imperative that you pay the tax as soon as you can. The information below details the penalties you will have to pay if your tax return is late. If a partnership tax return is late, then each partner will be required to pay the penalties shown below.

Penalties for missing the tax return deadline:

  • 1 day late: A penalty of £100 which will apply even if you have no tax to pay or have already paid the tax you owe.
  • 3 months late: £10 for each following day – up to a 90 day maximum of £900. This is in addition to the fixed penalty above.
  • 6 months late: £300 or 5% of the tax due, whichever is the higher. This is in addition to the penalties above.
  • 12 months late: £300 or 5% of the tax due, whichever is the higher.

How we can help

Loucas aims to ease the stress caused by self assessment and help you avoid costly mistakes, by offering a complete self assessment service.

We can save you time, worry, and money by handling this process for you. We will do all the necessary calculations, complete your return, and offer advice on how you might better manage your tax liabilities.

We do not believe that dealing with tax correspondence should be stressful or confrontational. We work towards having a constructive relationship with HMRC and believe that this works in the best interests of our clients.

Please do contact us at Loucas for help.  Alternatively, you can reach us on 01622 758257.

Can you claim vat back on your staff Christmas party?

By Stuart Shaw

2 min readWith 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;

  • food
  • drink
  • entertainment
  • 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.

  • Turkey,
  • 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?