Christmas Tax Tips For Your Business

Christmas Accounting Tips

Christmas is already a stressful time of year without the added worry of calculating how much you can spend on clients and employees or knowing whether you can even send them a Christmas card!

Here at K A Farr & Co. Chartered Accountants we have rounded up our top tips to ensure a smooth lead up to Christmas and to help you enjoy the festive period by taking the stress out of your Christmas accounting.

Can I Buy My Clients Gifts?

Yes! It’s Christmas time and as an employer you may want to show your appreciation for your clients or customers with a small gesture of a Christmas classic, a Christmas card. Sending a Christmas card will fall under ‘office expenses’ and is a tax deductible expense.

You can also send your clients or customers a small promotional gift as these are tax deductible, as long as those gifts clearly promote your business and incorporate a conspicuous advertisement for your business. They should cost no more than £50 each over the accounting period. However gifts of food, drink, tobacco or of any token or voucher exchangeable for goods are excluded. Sending non-promotional gifts to clients or customers is classed as entertaining by HMRC and is therefore NOT tax deductible.

Can I buy my Employees gifts?

Christmas presents paid in cash to employees will always be taxable along with other earnings. The same treatment also extends to vouchers that can be spent in either one or a number of different shops of the employee’s choice. The employee has to pay tax on the full value of the voucher.

If employees are given a seasonal present, such as a turkey, an ‘ordinary’ bottle of wine or a box of chocolates, as long as the cost is reasonable, HM Revenue & Customs (HMRC) won’t seek to tax it.

Unfortunately, HMRC will not tell us what monetary limit it considers as ‘trivial’ but in our experience, less than £50 a head is usually acceptable. If the value of the gift is more than this, it will be taxable and should be included on the employee’s P11D.

How Much Can I Spend On My Employees At The ‘Christmas Do’?

No Christmas season is complete without the infamous Christmas party. The cost of a Christmas do for employees is also an allowable tax deduction for you as a business owner and a tax free benefit for your employees but terms and conditions apply.

HMRC states that the Christmas party must be open to all of your employees and you can spend only a maximum of £150 per person, inclusive of VAT. Though this seems like a lot of money, this total cost must cover the cost of food, drink, transport and if an employee chooses to bring a guest, that guest should also be included in the head count but are not tax deductible themselves.

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.

Can I Invite Clients or Customers?

Generally, client entertaining isn’t allowable for business tax purposes. However, the cost of employee entertaining, as long as it’s not incidental to the entertainment of others, is allowed to be deducted. If you invite clients and customers to your party, it is important to consider how to apportion the costs for tax purposes.

Christmas Bonuses

Your employees Christmas bonuses are subject to PAYE and NI as additional salary.

“Fantastic News” for your Employees wink

You are 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. We know you will agree this is fantastic news! (This treatment only applies to routine seasonal flu jabs and does not apply to medical treatment of any sort or to other immunisations, such as immunisations against pandemic flu or other diseases).

Get more information on what you can and can’t do this Christmas by calling K A Farr & Co. Chartered Accountants in Southport on 01704 211 434.