Know the tax treatment if you treat your team this Christmas
With Christmas just a couple of weeks away, you may be planning to take your team out to say thanks for their hard work over some festive food and a glass of mulled wine. Or you may be planning a little thank you in the form of a gift.
There are tax rules around gifts and entertaining which are good to know to maximise your tax relief
If planning a festive lunch, dinner or party, the following apply:
1) Tax relief is available on “annual parties” such as a Christmas party with a maximum value of £150 per head. This is for all costs from start to finish, including taxis, hotels etc and if guests are also invited then the same limit applies
2) The invitation must be open to all staff
If you exceed the £150 per head, the whole cost loses it’s deductibility for tax.
To put this into financial context, spend £160 and it isn’t just the £10 that is taxable, the whole £160 is, which could equate to tax and NI of around £140!
It is worth noting that entertaining customers is not allowable for tax so if you decide to invite any key clients along then their share of the bill will need to be accounted for separately.
Gifts at Christmas for your staff
Cash gifts are not tax deductible and neither are vouchers that can be spent in a choice of shops. However, seasonal and “reasonably priced” gifts are allowable. Whilst HMRC don’t specify exactly how much, £50 per person is considered, in our experience, “reasonable”.
It isn’t that rare for customers or suppliers to deliver gifts, which can be gratefully accepted without tax implications if under the value of £250.
Tax that becomes due
Of course, more extravagant parties or lavish gifts are an option but tax will become due and will need to be either covered on the P11D form for the employee or, alternatively you as the employer can complete a PAYE Settlement Form (PSA) where you can cover the tax and NI on their behalf
Seek bespoke advice
As with everything tax related if you are unsure, seek advice from a professional accountant.
Figurit’s experienced team can help shed any light on your questions so you maximise tax relief whilst still treating your team this Christmas.
T: 020 7276 9333