It’s the time of year when business owners are considering their plans for Christmas activities, and rewards for staff, customers and suppliers. Here follows a reminder of some of the tax implications:
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 taxable.
Hospitality of any kind is not an allowable deduction and VAT cannot be recovered on it, (except entertaining foreign customers in some circumstances).
Not only is the cost of the party deductible against the company profits, there is an exemption for staff 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.
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.
Rules concerning other gifts by businesses
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 Charity
Gifts by a company are 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 via Gift Aid.