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Do you wrap up your online tax returns on Christmas Day?

Rothmans Accountants in Winchester ran a prize quiz for visitors to their stand at the city’s recent Christmas Lights Switch On event, asking them to guess how many people they thought had submitted their tax return on Christmas Day 2010.

According to HM Revenue & Customs, increasing numbers of people are choosing to file their self-assessment tax returns on Christmas Day.

Answers to the quiz ranged from nil to 4 million – but in fact the answer was 845.

The prize for the nearest correct guess (942) was a bottle of champagne, with a box of chocolate biscuits for the runner-up, who guessed 984.

Rothmans also handed out leaflets with Tax Top Tips to visitors to the event, along with (chocolate) money.

Jonathan Poulter, Director at Rothmans, says, “Filing a tax return may not be the highest priority for people when managing their business or personal savings in the current economic climate, but it is often in the first week of December that they realise the deadline is looming.

“At Rothmans we offer a free one hour consultation – which is often all you need to find out if you can file it yourself. If you find you can’t, the cost of having your tax return professionally prepared can be quite modest and may save you some of the tax due, along with saving you time and stress. By putting off doing your return until near the deadline, you may find your tax bill to be more than you expected and difficult to pay.

“Your online tax return must reach HMRC by 31 January 2013. If you haven't sent an online tax return before, make sure you register for HMRC Online Services in good time. The penalty for late self-assessment returns is an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time. Any tax due also has to be paid by that date. There are further late-filing penalties after three, six and twelve months.”

Tax Tips for Christmas

Christmas Tax Pitfalls

  • Christmas Bonus for Staff: This will count as ordinary earnings and be subject to tax and NI as if it were additional salary. Vouchers given will also be caught.
  • Client Entertaining: Hospitality of any kind is never an allowable deduction and VAT cannot be recovered on it, (except VAT incurred in entertaining foreign customers in some circumstances, following a recent court ruling).

Christmas Celebrations

  • Christmas Gifts to Staff: Small gifts such as a turkey, a bottle of wine or a box of chocolates can be given tax free to employees.
  • Christmas Party: Not only is the cost of the party deductible against the company profits, there is an exemption from tax and NICs on the benefit provided, as long as the party or function:
    - Is an annual event;
    - Is open to all of your employees (even if you are the only one); and
    - Costs no more than £150 (inclusive of VAT) per head.

    If partners or spouses attend then they also have a £150 allowance. The allowance covers all costs including accommodation and transport.

    This is an annual allowance, per person, to cover all staff events. If the company spends even £1 more than £150 per head allowance then the whole amount will be taxable, though this could be avoided if your employee pays the excess. The company can also recover the VAT on the element relating to you as an employee, but not the element relating to your spouse.’’
  • Long Service Award: Non-cash awards of £50 for each year worked can be given tax free to anyone who has worked at the company for over 20 years, provided no award has been made in the previous 10 years. Gifts to Customers or Suppliers Tax relief is available on gifts costing £50 or less provided they include a conspicuous advertisement such as a logo and are not food, alcohol, tobacco or vouchers.
  • Gifts to Customers or Suppliers: Tax relief is available on gifts costing £50 or less provided they include a conspicuous advertisemetn such as a logo and are not food, alcohol, tobacco or vouchers.
  • Gifts to Charity: Your company's deductible provided it is given without conditions or material benefit. The self-employed can claim higher rate tax relief on charitable gifts on their Tax Returns.

Charitable E-cards

Instead of the usual gifts or greeting cards for clients, staff and customers, why not buy a charitable gift and then design and send an e-card to let them know abnout it. It saves on postage and stationery and is tax deductible like any other charitable donation.