It’s (nearly) Christmas! That means gifts and spreading seasonal good cheer. As we look to get into the festive spirit, we wanted to share how your generosity this Christmastime can be tax-deductible.
Christmas parties
You are able to spend up to £150 per head, including VAT per year, in providing annual social functions to entertain staff.
However, it is worth noting that £150 is per head and not per member of staff. Your cost per head is worked out by dividing the overall cost by the number of people you have attending (including any other guests attending). When your employees’ partners or spouses attend an event, your budget can be £300 per couple.
Please note if the cost per head works out over budget, even if it’s £151, the full £151 is liable for tax and not just the £1 you’ve gone over.
Gifts to your employees
Gifts that you hand out to your employees are generally exempt from National Insurance and tax. But, this only applies if the gift is classed as trivial.
A trivial benefit or gift, must not exceed £50 in cost, and cannot be a reward for performance or part of your employees’ contract. It cannot be cash as HMRC will tax this as earnings (payroll tax). Classical gifts, including a bottle of wine or a box of chocolates, would be exempt from tax.
Gifts to your clients
Gifts to your customers are only eligible as a tax deduction if the total spent on each customer per year is no more than £50. The gift cannot be a conspicuous advert for your business and must not be food, drink or tobacco (unless they’re samples of your products).
Vouchers
Giving your employees cash vouchers, would result in the amounts being put through the payroll and subject to National Insurance and tax.
Non-cash vouchers up to £50 may be exempt under the trivial benefit rules.
Plan ahead
If you think you’ve missed out on some tax-deductible Christmas expenses, the only way to ensure you make next year’s tax-deductible is to plan ahead. If you need help with this An Accounting Gem are more than happy to help. Contact us today on 01473 744 700.
Merry Christmas!
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