How can I make sure that my staff do not pay tax or National Insurance contributions on their Christmas presents from myself? I also want to avoid having to deal with any additional paperwork…. Continue Reading
Gifts to Your Customers
These are not an allowable business expenses unless you are giving free sample of products or your gifts have conspicuous advertising and the cost of the gift does not exceed £50+VAT per person per year. Further, food, tobacco, drink or gift vouchers are not tax deductible.
You can reclaim the VAT as long as the cost is no more than £50+vat per gift to each customer.
Gifts to Staff
Taxman says trivial benefits to staff as staff welfare are tax deductible and VAT can be claimed by the employer. Further, employees are not taxed on these trivial benefits. Examples of trivial benefits include turkey, box of chocolates or bottle of wine. Taxman has not set financial limits on these trivial benefits but he has said that value of these gifts should be reasonable.
Third Party Gifts
Employees can receive gifts from third parties (eg suppliers and customers) without being taxed as long as the gifts are up to the value of £250 (including VAT).
The cost of providing the Christmas lunch for staff will be tax deductible.
The lunch can be tax free for the employees if it is in the form of an annual event or number of events to which all the staff are invited. However, you should try to limit the annual cost to £150 per head, counting all those who actually attend the event. If the costs exceed £150 per head (including VAT) your employees will be taxed on the total cost per head (not the excess above £150) as a benefit in kind.