As we start to embark on our Christmas festivities, we wanted to provide a useful reminder for clients of the rules around Christmas-giving to staff.
Firstly, businesses can spend a tax-free amount of up to £150 per head each year on the Christmas party, or similar event, as long as the event is open to all staff, and not just Directors. All spending during the year must be aggregated to see if the exemption applies. The £150 cap includes accommodation and transport home, as well as food and drink.
This is a great way to reward hard work and boost staff morale. However, if you spend one penny over the £150 limit, the full amount spent on the party becomes liable to income tax and National Insurance. If there is more than one event, which together cost more than £150 per head, the £150 can be offset against one of them, and the others will be taxable.
In addition businesses can provide a tax-free gift to staff, as long as the gift costs less than £50 each. This “trivial benefits exemption” won’t cover gifts where:
• The cost of providing the benefit exceeds £50
• The benefit is cash or a cash voucher
• The employee is entitled to the benefit as part of a contractual obligation
• The benefit is provided in recognition of particular services performed by the employee as part of their employment duties.
If you are unsure of the rules, contact Jackie or Andrew on 01625 524127.