Tom Penman, Tax Partner considers what you need to be aware of.
It’s that time of year again. Christmas trees. Bright lights. Mad dash for those last-minute gifts. Tax exemptions.
You see, the festive period always sees the same questions put to me and team here at Baker Tilly Mooney Moore – what effects do Christmas parties and gifts have for our clients’ staff?
Really, it’s not the red tape, or red ribbon, you might think it is.
As far as staff parties go, if your function is a once-a-year event then it’s typically tax exempt. It must be open to all of your employees and it can’t cost more than £150 per person, including VAT. And it’s important to remember that if you go even one pound over, then none of the amount is exempt.
And when I say employees, we really mean it. It can’t be friends, family, suppliers or even former colleagues – the people at the function must only be current staff.
The £150 per person for the party can cover anything related to that function – for example, it can also include transport to the party or overnight accommodation.
If you’re the kind of employer that staff only dream of, and you hold more than one event in the year, all the events will be exempt if the combined costs don’t exceed the £150 per person and they are made available to all staff.
Now, for the gifts.
A Christmas bonus for your staff – i.e. cash – is treated normally, and subject to tax and national insurance.
Any gift – an alarm clock, mouse mat or company logo mug for example – that are under £50 per person, won’t usually be tax liable.
In terms of gifts from third parties, such as a customer or suppliers, employees can receive vouchers for goods as long as they do not exceed £250 without them being taxable. Other conditions include that the gift really must be a gift – and not provided in recognition for services rendered – and it can’t be employer provided.
Still apprehensive about the tax implications of Christmas festivities? Contact the tax team on 028 9032 3466 to find out more.