'tis the season to be jolly!

With Christmas drawing closer party time is just around the corner.  Whilst this is good news and an excellent opportunity to reward hard working staff you don't want to receive any unexpected gifts (bills) from HM Revenue & Customs so it is a good idea to consider the tax treatment of any gifts made to staff and of course the staff Christmas party.

The Staff Party

Entertaining for employees is usually an allowable expense and you can also claim input VAT on the costs where a VAT invoice is provided.  There is a limit of £150 per head providing the entertainment is available to all staff.  This limit covers all events during the year (combined) and it's best not to go over it as if the costs amount to £151 per head the whole benefit is taxable on the employee, they may not thank you for this!

There are complications where non-staff attend events as you cannot deduct VAT on the costs relating to non-employees.  These costs are also not allowable for corporation tax.

The time for giving

Whilst there is no tax relief on gifts to customers you can give away samples advertising your business as long as it isn't tobacco, food or drink.  If your gift has no advertising on it then as long as it's below £50 it will be allowable.

Gifts to employees do attract tax relief although if it anything more than what HMRC considers 'trivial' it may be treated as a taxable benefit on the employee.

The gifts do need to be non-cash (that includes vouchers) otherwise it will be taxable on the employee as earnings and subject to PAYE and NI.

Remember

Christmas is a time for joy and not a time for unexpected tax liabilities!