Treat your team this Christmas and know the tax treatment
As Christmas creeps up, you may already have something planned for you and your team to down tools for a few hours and be festive. It’s usually a task that the practice manager is instructed with in mid October before all the restaurants get fully booked and the mince pies sell out!
Whether your plans involve a slice of Yule log and a glass of mulled wine or a larger scale Christmas party it is good to understand where you can claim tax relief so you don’t miss out.
Staff entertaining at Christmas
There is tax relief available for staff entertaining but certain factors do apply, as follows:
1) Tax relief is available on “annual parties” – such as a Christmas party
2) All staff must be invited though, even if they don’t attend
3) There is a maximum expenditure per head of £150
- This includes all costs, from start to finish, including taxis and hotels if arranged
- If guests are also invited to the event, i.e. non employees, the same limit of £150 applies
Important: Don’t exceed the maximum expenditure per head of £150
It is essential to stick within the £150 per head because if exceeded then the total cost of the party becomes taxable, as a benefit in kind to the employee. It isn’t just the element over the £150.
For example, if the cost per head equals £160 then it could result in an additional £140 being due for payment in National Insurance and additional tax. This would need to be reported on the employees P11D form or alternatively a calculation can be made and a PAYE Settlement Agreement (PSA) completed whereby you, the employer, “settles” the tax and NI on behalf of the employee
Obviously both of these are not ideal solutions so should be avoided by working within the boundaries, if you want to maximise tax relief.
Customer entertaining at Christmas
As customer entertaining is not an allowable business expense, if patients, customers or suppliers are invited to join your annual Christmas party then their share of the bill will not be allowable for tax relief and the right apportionment will need to be applied.
Gifts for employees at Christmas
There are also specific rules around treating your staff at Christmas with gifts.
Cash and vouchers
Any cash gift is not allowable and will be taxed along with regular income under PAYE. The same applies for vouchers that can be spent in a choice of shops.
Seasonal gifts such as a “reasonably priced”, box of chocolates or a festive hamper are considered allowable, although it is vague how much HMRC consider a limit for tax purposes.
In our experience though £50 per person is considered “reasonable” and shouldn’t raise eyebrows. Higher valued gifts can of course be provided but they will be fully subject to tax either by the employee on their P11D form or by you as the employer by completing a PSA form.
Small gifts from your patients and suppliers
As a final note, often the festive season results in nice surprises turning up on your doorstep from your patients or suppliers so they also have the opportunity to pass on their thanks to your and your team.
As long as these gifts do not cost more than £250 then it will be tax-free.
Seek bespoke tax advice
As with everything tax related if you are unsure then seek advice from the team at Figurit.
Our experienced team can answer your questions and ensure you maximise tax relief this Christmas whilst saying the all-important “thanks” to your team. Contact us on:
020 7376 9333
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