Another year is nearly at an end and many business owners’ thoughts will be on treating their staff at Christmas for the twelve months that have just passed.
In this article, Kelsall Steele looks at what you can spend on your staff this festive season without leaving yourself open for a bill from HMRC
Christmas party allowance
Your business can spend a tax-free amount of up to £150 per member of staff on your Christmas party or other similar events during the year. If the Christmas party is the only one you hold, it’s safe to assume that your £150 per head limit still applies.
Within your £150 per person, you can include food, drinks, accommodation, and transport home.
Be careful though because if you spend a single penny over the £150 limit, the whole amount you spend on the party will be subject to income tax and both forms of National Insurance.
If yours is a family company, this allowance is often used to provide everybody with an enjoyable tax- and NI-free family meal. If you don’t use up the £150 per head limit in one go with your family, you can add an additional event as long as the spending does not go above the threshold.
Trivial benefits exemption
You can provide a tax-free gift to staff at Christmas too (or at any other time of the year). This is called the trival benefits exemption.
The value of your gift can not exceed £50. Please note that any gifts provided will not be exempt if:
- it is cash or a cash voucher
- it is provided in recognition of an achievement performed by your employee as part of their duties
- your staff member is due the benefit as a contractual obligation.
Many companies, in an attempt to foster closer relationships and greater loyalty with their staff, will use the trivial benefits exemption either on a staff member’s birthday or present the workforce with individual gifts prior to the Christmas party.
Long service awards
If you have any long-serving members of staff with more than 20 years’ continuous employment with you near Christmas (or at any other time of the year), you can gift up to £1,000 to them as a reward.
Your £1,000 gift can not be cash, cash vouchers, credit tokens, shares, or securities. It has to be a gift in the traditional sense of the word like a watch, a handbag, or a television set.
If you spend more than £1,000, only the amount over £1,000 is taxable.
Your employees accrue a £50 per year of service allowance for every 12 months they work for you (again, continuously). This can only be turned into a gift upon 20 years’ service.
If you intend to celebrate 21 long years of service, or some other measurement of time, please be aware that the money spent on the 20th anniversary awards is taken into account when calculating the amount available that is tax free for the later rewards.
Special treats for directors
During the year, you can take small amounts of profit from your business under the “trivial benefits” benefit-in-kind. Up to £300 a year is available with no more than £50 being spent on an individual treat. The amount you do spend is deductible for corporation tax purposes and the gift can not be in the form of cash or cash vouchers.
Treating your staff – know the rules
If you’d like to speak with the experienced Kelsall Steele team about rules on treating your staff at Christmas and at other times of the year, please call us on 01872 271 655 or email firstname.lastname@example.org