What tax relief is available on rewarding my team this Christmas?

  1. Uncategorized
  2. What tax relief is available on rewarding my team this Christmas?

 

Presents and parties in a virtual world seems a lot different to 2019 but other than planning your creative Christmas quiz, not too much has changed.

This year has brought about enough uncertainty, so make sure you are certain about the tax rules surrounding your festive generosity.

 

Gifts

 

Many employers like to give gifts to their employees in December and providing it is seen as a trivial benefit no tax charge will be incurred by the recipients. For this to be the case, the gift must meet certain conditions;

 

-Total cost of providing the benefit (gift) should not exceed £50 per employee. This can be an averaged amongst all employees if they are different values.

-It is not cash, or a cash voucher.

-It is not an entitlement (eg. Part of a contract).

-It is not in recognition of particular services performed.

 

If the conditions are not met, the gift will be a benefit in kind, therefore taxed and will need reporting to HMRC.
Please note, the £50 cap is not an allowance, if it is exceeded the entire amount of the benefit will be taxed.

 

Common examples include a gift of flowers on a birthday or a turkey at Christmas.
More than one trivial benefit can be gifted each year but if it is given to a director, office holder or a member of their families, there is a limit of £300.

 

Cash

Despite the inner child brought out in us all when opening a Christmas card to cash, it isn’t always the best solution for your employees.

The reason is because of PAYE income tax and Class 1 national insurance. Regardless of the reason the money was given, cash given to employees is subject to these deductions and depending on each employee’s individual circumstances, the amount they receive may vary.

 

Celebrations

2020 is a year where a team celebration is needed more than ever but due to restrictions employers are having to think of more creative ways to boost team morale.

For years employers have been allowed an exemption up to £150 per head (including entertainment, food drink, transport, accommodation and VAT) for an annual event.

Similar to the gift allowance, if the £150 is exceeded the whole amount will become taxable.

 

This year, due to all face-to-face meetings and events being replaced by virtual ones HMRC have confirmed that virtual events can be included when considering the £150 exemption.

 

If you need any more advice on Christmas gifts and events for employees please call us on 01482 888820