As many businesses will be aware, there are very few "tax free" perks that they can give to their staff without the Revenue taking a very keen interest and seeking to impose tax and NIC liabilities. For example, if a business wants to provide their staff with free meal vouchers, then the value of the meal voucher must not exceed 15 pence per day, otherwise tax and NIC liabilities will arise. Ebenezer Scrooge springs to mind!
Christmas Party
However, even the Revenue have a heart when it comes to Christmas, as they are far more generous when looking at the staff Christmas party. This is because the 15 pence limit is swept away and a "tax free" exemption of £150 per person is allowed. As you might have guessed, there are a number of conditions that need to be met, but these should not be a problem, as they will apply in most situations:
- The party must be open to all staff, and
- In calculating whether the cost of the party has exceeded the £150 per person exemption, you need to include other related costs such as taxis, overnight accommodation and also VAT. If spouses/partners are attending, then they also have a £150 exemption.
There is a small trap for the unwary, because the £150 exemption applies to the total annual cost per person of all staff social functions during the year and you therefore need to take account of other functions, such as the office summer barbeque. So be careful if you party regularly! Finally, if you do party regularly and the total cost exceeds £150, the whole amount is then taxable not just the excess over £150, so you do need to watch this!
Gifts To Staff
As an alternative to a Christmas party, some businesses give a bottle of wine or a turkey to their staff at Christmas. In the past, the Revenue would normally seek to impose a tax liability on such gifts. However, they have now adopted a more pragmatic approach and will allow this, providing the gift does not exceed typically £25 per employee.
Unfortunately a case of wine or a food hamper is likely to be viewed as being too generous in the eyes of the Revenue. Likewise, vouchers (e.g. M&S or Debenhams) would not qualify as tax-free gifts, even if their value fell within the £25 limit. In these situations, we would recommend that you deal with the tax implications, otherwise your employees could end up with a tax bill, which is a Christmas present they will not thank you for! The most popular way of dealing with the tax implications is for the business to enter into a PAYE Settlement Agreement (PSA) with the Revenue, whereby the business essentially pays the tax and NIC on behalf of their employees.
Gifts To Customers And Key Contacts
Businesses can also claim tax relief on the cost of gifts to customers and key contacts. However, in order to qualify for tax relief:
- The cost of the gift must not exceed £50 per recipient, and
- The gift must carry a conspicuous advertisement of the business, and
- The gift must not be food, drink, tobacco or tokens or vouchers exchangeable for goods
So whilst the bottle of malt whisky will easily fall within the £50 limit, it does not satisfy the latter of the above conditions and will not therefore qualify for tax relief.
Typical qualifying gifts will be calendars, pens and diaries, providing they carry the name of the business.
Some businesses provide gifts to their customers in the form of a social event such as a ball or sports fixture. One way to get round the above rules is for the business to sponsor the event or advertise at it and, in return, get complimentary tickets which can then be given to their customers. Businesses can claim tax relief even if the tickets are worth more than £50 because the sponsorship or advertising costs should qualify as business marketing expenses.
If you have any queries on the above please do not hesitate to contact us. |
