With the festive season now upon us, here's our guide to the top tax tips that will make your Christmas a tax-efficient celebration!
Christmas party
You can hold a Christmas party, up to the value of £150 per head (inclusive of VAT)
The party must be available to everyone, even if some choose not to attend
Employees can bring a partner to the event, but don't invite customers as that gets complicated!
The limit of £150 applies to everyone attending the party not just employees. To calculate if you fall within the £150 exemption, take the total cost of the function and divide by the number of attendees
You don't need to spend the full allowance at Christmas. The £150 is an annual exemption, so it's perfectly fine to have a cheaper Christmas do and then, say, a summer BBQ. Be careful though, if you exceed the £150 by just £1, the whole event becomes taxable (not just the excess)
gifts to employees
Gifts to employees that cost less than £50 are classed as trivial benefits and aren't subject to tax
HMRC manuals talk about a seasonal gift of a turkey, bottle of wine or some chocolate, but you can buy them pretty much anything - including giving a £50 gift voucher
However, you cannot gift cash! That would be taxable through the payroll
There is no limit on the £50 gifts you can give employees throughout the year, subject to:
- They can't be gifts for good performance. So, a birthday gift is fine, one for smashing a sales target isn't
- You don't make them too regular so that they look like additional remuneration. They need to be exceptional "thank you's"
Employees may also receive gifts from customers or suppliers. As long as that gift is worth less than £250, there's no tax implication for the employee
Gifts to Customers and suppliers
Gifts to customers and suppliers are not generally tax deductible. However, there are some exceptions
- The gifts to a customer in any one year must not exceed £50 in value
- Advertising must appear on the gift itself, not just the packaging
- The gift cannot be tobacco, alcohol or vouchers
Of course, you can choose to gift more or use non branded gifts, you just can't get a tax deduction for them
Directors gifts
Which Director doesn't love a little pressie at Christmas?
Gifts to Directors have similar rules to those for employees:
- Must be limited to £50
- Can be vouchers
- Can't be anything that can be exchanged for cash
There is an annual limit of £300 per Director (so up to 6x£50 gifts) per year. You should spread the £50 vouchers out throughout the year, not gift all £300 in one go
That's £300 a year you can take from the company tax free, whilst saving £75 a year in Corporation Tax
There you have it. 4 ways to celebrate at Christmas and get the taxman to foot some of the bill!
