Remember to be Tax Efficient This Christmas!
With the festive period almost upon us, many employers will be busy organising Christmas parties or purchasing gifts for employees. To ensure that you remain tax efficient over the holidays, we’ve put together a handy reminder of the rules according to HMRC…
Rewarding staff and showing your appreciation for their efforts can be a fantastic morale booster and what’s more, it’s also a great way to celebrate the special time of year with your team. As an employer though, it’s also important to ensure that you treat your employees in the most tax efficient way possible – all taxable benefits must be properly declared to ensure that your business has a very merry Christmas!
Gifts to Employees
If you decide to treat your team to a cash bonus this Christmas, it MUST be put through the payroll and you must deduct the appropriate tax and national insurance. Although it is a time for giving, there is no exemption to this rule, all cash is taxable.
If you choose to give goods at Christmas, whether it’s a bottle of wine, a box of chocolates or even a shopping voucher, and they can’t be counted as “trivial benefits”, you must report the goods on your P11D form and pay Class 1A National Insurance on the value of the benefit. If the goods have no resale value, you need to use the amount the good cost you, if the goods do have a cash resale value, use whichever amount is the highest e.g. the resale value or the amount the goods cost you initially.
What are “Trivial Benefits”?
In it’s simplest form, when gifts fall under the category of “Trivial Benefits” it means that as an employer, you don’t have to pay tax on a benefit for your employee if all of the following apply:
- The item cost you £50 or less to provide
- The item isn’t cash or a cash voucher
- The item isn’t a reward for their work or performance
- It isn’t in the terms of their contract
You don’t need to pay tax or National Insurance on the items, nor do you need to let HMRC know.
If you’re not sure as to whether or not your gifts count as a trivial benefit, contact us today for expert advice and support this Christmas.
It’s Party Time!
Christmas parties can be a key date on the calendar for many businesses. With the festivities at a high, parties provide both employers and employees with the chance to unwind and celebrate the special time of year together. The good news is that according to HMRC, you can entertain your staff without causing them a tax liability. In fact, you can spend up to £150 per year per person without any tax implications. This limit not only includes the Christmas party, but can also include the summer BBQ and any other similar functions. The limit is £150 “per head”, so this would be £300 per member of staff if partners are invited.
To be exempt from reporting anything to HMRC or paying tax and National Insurance, the party or similar social function must meet the following criteria:
- Cost £150 or less per head
- Be annual, such as a Christmas party or summer barbecue
- The event must be open to all employees
Speak to Moore’s Accountancy Today for More Information
If you’re thinking of treating your workforce this Christmas but you would like to discuss the tax implications further, please do not hesitate to contact the Moore’s Accountancy team today. Established in 1996, we have a wealth of industry experience behind us and can help you to ensure that your business enjoys a very Merry – and tax efficient – Christmas! Call us on 01782 660 822 today or fill in our online enquiry form to arrange an appointment with one of our tax advisors. Although we are based in Newcastle under Lyme, we offer our service to Stoke on Trent and the wider areas.