Ahead of the festive season, Belfast accountancy and advisory firm Baker Tilly Mooney Moore is urging businesses to consider their taxation obligations when planning their long-awaited festive celebrations and corporate gifting plans.
Head of Tax at Baker Tilly Mooney Moore Angela Keery said: “If a work Christmas party is on your agenda, the tax implications will be the last thing you consider when arranging venues and purchasing gifts for employees or clients. With all the good intentions however, rewarding staff and clients at Christmas can still leave you on the wrong side of your taxation obligations.”
“Getting this wrong can be costly to both you and potentially your employees, meaning that any goodwill generated in the festive period would surely be lost if they are faced with the tax bill for the privilege. Here, I set out how best to remain compliant and legal when arranging celebrations or purchasing gifts for employees or clients.”
Remaining Tax Compliant at Christmas
- Provided the party or function is an annual event, this will qualify as a tax-free benefit if open to all staff, not just directors, and all events in the year come at a cost of less than £150 per person including VAT. This should cover any related costs such as food, drink, transport, and overnight accommodation. If you go over the £150, however, then none of it is exempt, so it is important we don’t party too hard.
- If you hold more than one annual event in the year, all will be exempt if the combined costs do not exceed the £150 and they are made available to all staff. If not, you may need to choose an event covered by the annual exemption where costs are below £150 per head, and the other events will be a taxable benefit for your employees.
- In addition to the Christmas party, many employers will also be considering making gifts to their staff. The tax treatment of gifts will depend on who will be receiving it, be that employees or customers.
- If opting for a Christmas bonus, these must be treated in the normal way and remain subject to tax and national insurance.
- Gifts to employees such as hampers will be tax-free, provided they fall within the ‘trivial benefit’ exemption. This applies when the cost including VAT does not exceed £50; it is not cash or a cash voucher that could be exchanged for cash; it is not provided in recognition of past or future services by the employee and they are not already entitled to this within their contractual arrangement. Where the employer is a ‘close’ company and the benefit is provided to a director, the total value of trivial benefits they can receive in a tax year cannot exceed £300.
- In terms of gifts from third parties, such as suppliers or customers, employees can receive vouchers without tax as long as they do not exceed £250. This must be genuinely intended as a gift, however, and not provided in recognition for services rendered.
- While gifts to employees are tax deductible for a business, gifts provided to third parties are not an allowable expense, unless the cost does not exceed £50 (per person, per period), bears the name or logo of the business and does not include food, drink, or tobacco.
- Still apprehensive about your tax implications? Contact the tax team at Baker Tilly Mooney Moore on 028 9032 3466 to find out more.