The season of goodwill is just around the corner as Christmas approaches.
It is a time of year when employers look to reward their staff for their efforts throughout the year.
But they should be aware that certain tax, National Insurance and reporting obligations could apply.
We want to ensure that you enjoy the festive season just as much as your team, so we’ve put together our top tips to ensure that you stay on the right side of the taxman this Christmas.
What about staff parties?
According to HMRC, the total cost must not exceed £150 per head and must be for your employees and any members of their family and household who attend as guests. The total needs to include VAT and other costs, such as transport and accommodation.
All staff must also be invited. If you spend more than £150 per person, the entire amount is a ‘benefit’ and must be declared on the P11D and tax will be due.
The annual limit is £150, so you could have a summer BBQ at £50 and a Christmas party at £100 and providing you meet the conditions it would be non-taxable.
Getting gifts right
Trivial benefits are items of value given to an employee that do not count towards taxable income or National Insurance Contributions (NICs).
To qualify, the gift must meet ALL of the following conditions:
- The gift isn’t in the terms of the employee’s contract
- It is below the value of £50
- It isn’t a performance-linked reward
- It isn’t cash or a cash voucher.
A trivial benefit in kind could include a Christmas lunch, a small Christmas present, or a gift on the day of an employee’s wedding.
If the gift does not meet all of the above criteria, it must be reported as a benefit in kind to HM Revenue & Customs (HMRC) and tax must be paid as appropriate.
What about incidental expenses?
Incidental expenses, as described by HMRC, are expenses “incurred by an employee while travelling overnight on business”.
These may include purchasing newspapers, paying for laundry or using the hotel telephone.
As long as the value of the expenses does not exceed more than £5 per night for travel within the UK and £10 per night for travel outside the UK, they do not have to be reported to HMRC.
If you would like advice on benefits and gifts that you can give to your employees, whether at Christmas or any other time of the year, please contact us.
Link: Tax on trivial benefits