Christmas gifts to employees
With Lymington High Street sparkling with enticing gifts for the festive season, here's the lowdown on Christmas gifts for staff and customers from a tax perspective...
Gifts to Staff
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.
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, but 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."
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, or on the PSA, as above. This concession also applies to seasonal flu jabs which are also considered trivial but your employees may not be quite so appreciative of the “gift”!
Christmas Bonus for staff
This will count as ordinary earnings and be subject to PAYE and NI as if it were additional salary.
‘Small' gifts from third parties
It is worth noting that gifts can also often be received by your employees from third parties due to contact they may have had with throughout the year as a result of their employment. As long as such gifts do not exceed £250 in cost, it won't be taxable for the employee.
Gifts to customers
Gifts to customers are only allowable as a tax deduction if:
- the total cost of gifts to any one individual per annum does not exceed £50 and
- the gift bears a conspicuous advert for the business and
- the gift is not food, drink, tobacco or exchangeable vouchers.
However samples of a trader’s product are allowable even if they are food, drink or tobacco.
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.
Disclaimer: The information above does not constitute individual advice. New Forest Tax Accountants will not accept any responsibility decisions taken or not taken on the basis of the information above. Any reference to legislation and tax is based on our understanding of U.K. Law and HMRC practice at the date of publication of this Tax Guidance Note. Specific advice should always be obtained prior to taking or not taking any actions.