It is that time of year again when most of us are going out to enjoy numerous Christmas parties. But do you know exactly what you can claim and are you making the most of your expenses?
The cost of a staff party or other annual entertainment is allowed as a deduction for tax purposes. Also, as long as the criteria below are followed, there will be no taxable benefit charged to employees:
If employers breach these limits, they can pick up the tax cost by using a PAYE settlement agreement.
‘Trivial’ Gifts for employers
Employers may find the following Revenue concession useful – we have copied the note directly from the HMRC handbook:
“An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts are considered to be trivial and as such are not taxable. For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable. However, where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned.”
One final cautionary note regarding VAT and staff gifts; VAT is chargeable by the employer when an employee receives gifts totalling more than £50 in a year. Turkeys however, are zero rated for VAT purposes!
So while you’re out enjoying yourself during the festive season, you can party away knowing exactly what you can and cannot claim.
Merry Christmas, from all of us at Grampian Accounting.
As always, if you have any questions, please feel free to contact us.