As we approach the Christmas season, you may be contemplating how you can thank your clients for their business, and your staff for their hard work. Here we summarise how HMRC views gifts and parties:
Companies can organise and pay for an event/party for employees up to the value of £150 (inc VAT) per head. This value is over the course of the year – so if you hold a Christmas Lunch and a Summer Barbecue for staff, you can spend up to £150 per head over the two events. The amount of £150 per head applies to all those attending, which can be useful if employees are allowed to bring guests.
The whole cost of the event has to be under £150 per head, including taxis and hotel accommodation. If you go over the £150 per head, it’s the whole cost, ie not just the amount over the £150, which will be treated as a Benefit in Kind for the employees.
Business owners can give “trivial” gifts to employees. Unfortunately HMRC does not define “trivial” but experience suggests that gifts such as a turkey, bottle of wine, or a box of chocolates should be acceptable, and the gifts should cost less than £50 per head. Remember that any gifts of cash or vouchers will always be taxable.
If your employees receive gifts from third parties as a result of their employment, they won’t be taxable for the employee as long as such gifts do not cost more than £250.
Generally any client entertaining is not allowed for tax purposes. In addition gifts for clients and prospective clients are also not allowed. The only exception is where the gift is small and advertises your company’s services. This excludes food and drink. The advert, eg company logo must be on the item, not just the wrapping. Examples of permissible gifts include pens, diaries and mouse mats.
If you have any queries, contact Jackie or Andrew.