It’s Christmas time again, which means it’s time to break out the cards and throw a do. Nobody wants to be worrying about the tax implications of doing something nice for their employees, so we’ve laid it all out as simply as possible for you.
1) How Much Can I Spend On The Christmas Do?
Ah, the Christmas party. No other event fills us with such a confusing mix of anticipation and dread. One thing you don’t have to dread is a tax headache – in theory. Not a lot we can do about the Christmas jumpers though.
Of course, there are some T’s & C’s. HMRC states that the Christmas party must be open to all of your employees, and you can spend only a maximum of £150 per head inclusive of VAT. That might seem like more than enough, but that money has to cover everything – food, drink, accommodation and transport.
If the cost of qualifying parties goes over £150 per head then unfortunately all the costs (not just those above £150 per head) are taxable on the employee as a benefit in kind. If you’re not sure whether you’re going over the limit or not, you’re best giving us a call here at KA Farr & Co – we’ll make sure everything’s straight!
2) Can I Invite Clients or Customers?
Generally, you can’t claim client entertaining as a business expense. You also can’t claim employee entertaining as a deductible expense if it’s only incidental to entertaining a client. So if you decide to invite clients and customers to your Christmas party alongside your employees, it’s important to strike the right balance.
Having HMRC decide that your Christmas party was actually mainly for the benefit of clients means that none of the employee’s entertainment can be claimed as tax-deductible. That’s a nasty Christmas present to come back to, so make sure you’ve got everything straight before the do actually happens.
3) Can I Buy My Clients Gifts?
Yes! Though as with all things HMRC-related, there are terms and conditions. Sending a Christmas card falls under ‘office expenses’ and is a tax-deductible expense, so no worries there.
You can also send your clients or customers a small promotional gift. They really do have to be small (£50 limit over the entire accounting period) and promotional (must be conspicuously branded) though. Sending non-promotional gifts to clients or customers is classed as entertaining by HMRC and is therefore NOT tax-deductible. No booze, food, or tobacco, either.
4) Can I buy my Employees gifts?
Yes, although cash gifts are definitely not tax-deductible. Nor are vouchers. HMRC gives a delightfully vague definition of tax-deductible gifts as “trivial”. So a bottle of wine tends to be fine, but a large hamper may be a bit too much, and would need to be counted for tax purposes.
With the exception of a limit on the cash value of gifts – up to £50 – there’s no hard and fast rules here, unfortunately, so check in with us if you’re not sure if your planned employee presents may break the rules.
5) Christmas Bonuses
This one is at least straightforward – your employees Christmas bonuses are subject to PAYE and NI as additional salary.
6) Fortunately, Flu Jabs Are Still On The Menu
You are still able to supply your employee with the gift of flu immunisations. If an employer provides employees with immunisations against seasonal flu (“flu jabs”), the benefit should be treated as trivial. So at least there’s that.
Get more information on what you can and can’t do this Christmas by getting in touch with K A Farr & Co. Chartered Accountants in Southport on 01704 211 434.