Small Gifts & Staff Parties
29th November 2016
It’s often the case that employers wish to mark Christmas or other special events in the year with some form of gift. The rules now allow for employers to be a little bit more generous than a bottle of wine or a turkey without infringing on benefit in kind reporting and additional tax obligations.
There are three key conditions to the rule:
- the trivial benefit must cost no more than £50
- the benefit must not be a reward for services or in any way contractual
- the benefit must not be cash or a cash voucher (gift cards are ok)
For directors of owner/managed businesses there is a cap of £300 per annum for each director.
So in summary, it’s ok for the occasional gift from the employer within the ‘triviality’ limits of £50 per gift to an employee or director as long as it’s not in recognition of any work done. Celebrating religious festivals, birthdays or even a sunny day might prompt the more generous employer into splashing out on some small gifts for staff without needing to worry about extra tax costs such as national insurance.
You can’t use these rules to incentivise staff though, eg these rules won’t apply if you run staff member of the month awards as this would be deemed a reward for services.
As long as the conditions above are met, it will be a tax free gift for staff and tax deductible for the business.
A business can entertain its staff and directors at least once per year so don’t forget to book either your Christmas party or plan for a summer event for yourself, your staff and partners. The business can pay for this and the expenditure will be tax deductible provided the cost per head does not exceed £150 including VAT.
The cost per head can include accommodation, transport, food and drink.
The annual event must be open to all employees to attend.
If the employer provides two or more annual parties or functions then as long as these two parties don’t add up to more than £150 per head in total then both parties are tax allowable.
For director only companies, these rules still apply but VAT can’t be reclaimed for a director only event.
It’s ok for directors to take their other halves to their annual event and, for example, a summer barbecue might involve the children too of employees and directors. As long as the total cost is less than £150 per head then it should be allowable, however, if the non-employees attending becomes more than incidental – the event might not be exempt.
We like our clients to ensure that they pay the least amount of tax within the rules. The above are two exemptions that help keep your staff happy and minimise tax at the same time. A win win situation!