Businesses across Northern Ireland are being urged to open their ‘mince pies’ to a sackful of festive tax benefits that could save them some money this Christmas.
As preparations get under way for the annual staff party, Santa isn’t the only one who’ll be spreading cheer this Christmas, with HMRC delivering a number of festive tax benefits that might even bring a smile to the face of the infamous Ebenezer Scrooge.
Northern Ireland’s digital accountancy specialist, Exchange Accountants has unwrapped these tinsel-covered tax treats to help make this Christmas a little merrier for local businesses and ensure they don’t miss out on some ‘cracker’ savings.
“Christmas is an important but potentially costly time of year for Northern Ireland businesses with many laying on parties for their staff and buying gifts for key clients and customers,” explains Gary Laverty, director at Exchange Accountants.
“However, many local companies are unaware of the tax benefits at this time of year to help reduce the overall cost of Christmas to their business.
“So in this season of goodwill, we thought we would unwrap all of these festive tax treats, deliver them on a plate for NI business owners, and hopefully ensure that they hear the sweet sound of cash jingling, as well as those sleigh bells, this Christmas,” he added.
The experts at Exchange Accountants have put together the following seasonal tips to help make Christmas as tax efficient as possible for NI companies…
Exchange Accountants – festive tips for a merry tax efficient Christmas
Christmas is just around the corner, and many businesses are looking forward to celebrating the end of a challenging year with their staff and clients. Here are some tips to help companies enjoy the festive season without breaking the bank (or the tax rules)…
The Staff Christmas Party
Christmas wouldn’t be the same without the annual staff party, but did you know that employers can spend up to £150 per head tax free on annual social functions to entertain staff. This amount should cover food, drink and, where applicable, transport, venue hire and accommodation. If employees bring guests, they will be included in the head count when checking if the £150 per head limit has been exceeded. Be careful though that the cost does not go over £150 per head, as the FULL amount would then be taxable and not just the excess.
To qualify for the exemption, the event just needs to be something that the business intends to hold annually, rather than a ‘one-off’, and must also be open to all staff. VAT can also be reclaimed provided valid VAT receipts and invoices are retained, and companies can also deduct the cost of the party as an allowable expense for corporation tax purposes. Don’t worry if you can’t meet in person as virtual online parties are also eligible, with costs attracting the same level of tax relief as for a physical event.
Tax-deductible Christmas presents for clients and customers
Gifts for clients and customers are tax deductible as long as the cost per year is less than £50 per person and your gift contains a noticeable promotion for your company. Unfortunately, food and drink gifts do not qualify for this particular benefit. VAT can be reclaimed provided the cost of the gift does not exceed the £50 limit.
Christmas gifts for staff
Gifts for employees are tax free if they cost less than £50 and are considered a ‘trivial benefit’ – in other words, not a performance-related reward or part of their contract. Again, this is an ‘all or nothing’ exemption – so if the cost of a gift exceeds £50, then the full value will be taxable for the employee under the usual ‘benefit in kind’ rules. Unlike gifts to clients, gifts to your employees which contain food or alcohol (e.g., a hamper or bottle of wine) DO attract tax relief. VAT can also be reclaimed in full on the cost of gifts to employees.
While cash gifts will still attract tax relief for your company, they are NOT tax-free for employees and must be taxed along with the employee’s other earnings via the payroll. Similarly, cash vouchers are tax deductible for your company but NOT tax-free for the employee and subject to PAYE and National Insurance, although a gift card for a specific retail store is acceptable.
End of year employee awards
If you’ve had a successful year and would like to reward particular members of staff for their contribution during the year, there are a couple of tax-free ‘cash’ awards that you can give to staff. ‘Encouragement awards’ up to the value of £25 can be given to employees in recognition of extra special effort or good suggestions for the business. At a higher level, ‘Financial Benefit’ awards of up to £5,000 (subject to certain limits) can be made to staff who have played a key role or made a suggestion that has saved or earned your company a lot of money. These staff suggestion schemes must be open to all employees and financial awards must only be made in the event of an employee going beyond the normal call of duty or making a business-improving suggestion that is not part of their daily job (e.g., participation in a ‘new ideas’ meeting).
As an additional staff benefit which costs nothing and attracts no tax, why not give staff an extra half day’s holiday for Christmas Shopping or consider an afternoon off to allow proud parents or grandparents to watch the school nativity play. Offering additional leave shows you are a caring employer that values work-life balance and recognizes the importance of spending time with family and friends during the holidays. It also provides a number of potential benefits, such as boosting staff morale, creating a positive work environment, building loyalty, improving staff retention, and even increasing productivity from a happy and well-rested workforce.
Exchange Accountants was established in 2011 and provides premier accountancy services and tax advice to a wide variety of locally based SMEs and individuals.
Exchange was the first accountancy practice in Northern Ireland to be recognized as a Xero Gold Partner – and in 2021, the company achieved Platinum Partner status with the market-leading cloud accountancy software provider.