For business owners, it is a great opportunity to promote your business, send gifts and entertain your staff. We are frequently asked about what you can and can’t expense, and what you can claim back on.
As a rule, in accounting, no deduction is allowed for business entertaining and gifts in calculating taxable profits however there some exceptions.
So, we thought we would share some of the most common Christmas questions and answers:
If I throw a staff Christmas party is it tax exempt?
You will be happy to learn that the answer is YES providing the cost of the party comes to less than £150 per head. This figure also takes into account non-employees who you might also invite to attend the event. There are few rules that apply, for example, the party has to be open to every employee in your company, not just one department or group of staff, and the event has to be held once a year, and not be a one-off event. If your company is VAT registered there is a bonus as you can reclaim the VAT paid on the event for each employee (sadly it does not include guests). This comes under the category of staff welfare.
Can I deduct the cost of a Christmas gift for my client?
This has a lot of business owners scratching their heads. YES, you can provide the gift as a clear (conspicuous) advert for the business, so basically a branded item. There is also a limit of no more than £50 per year per recipient.
The answer is NO to any items of food, drink, tobacco and also no vouchers.
Some examples of a deductible gift would be a diary, notebook or a water bottle featuring an advert for the business etc. It is a chance to get creative!
Oh, and don’t forget the Christmas Cards – if you are planning to send your customers one then you can claim these as a business expense.
What are the rules around giving my staff a Christmas present?
Everyone likes to receive a small gift, and this can be great for morale. The good news is that you can treat your staff without having to include these within PAYE settlement agreements or disclose on P11D forms. However, these benefits must not:
- Exceed £50 per head (this applies to each time you provide a trivial benefit). Go above this value even by 1p and the full value of the benefit will be taxable.
- Be a cash payment, however, gift vouchers are allowed, providing they can’t be exchanged for cash
- Be part of any contractual obligation
- Pay for services that are performed as part of regular employment duties.
These trivial benefits are in addition to the annual staff entertaining allowance of £150 per employee per annum. So, you could give a store gift card, flowers, chocolates, wine, hampers or even take your staff out for a meal but don’t forget you need to have a receipt!
We hope that this has made things a little clearer and will help you to work out the most efficient way to put things through your business as it is the festive season after all and a time to celebrate!
If you have any further questions please feel free to get in touch with the Accountwise team on 01189 623 702 or email us on firstname.lastname@example.org. We are just around the corner! Check out our latest news and blogs at www.accountwise.co.uk.
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