Tax Free Christmas Perks
Following the relatively subdued Christmas of 2020, many are hoping for a much bigger and brighter Christmas this year.
To help on the financial side of things, we’ve detailed below some of the tax perks that businesses can take advantage to boost the festivities.
Christmas Party
The Christmas party is an allowable expense for a business and tax-free benefit for the employees, so long as the following conditions are met:
- The total cost does not exceed more than £150 (including VAT) per head. This includes food, drink, entertainment, transport, accommodation etc.…
- The party is open to all staff (or all staff at a particular location).
The tax exemption also applies to online or virtual parties.
Employees partners can be invited providing that the party is open to everyone’s partners. If partners are invited, the limit of £150 per head applies to them as well.
I.e. If employees are allowed to bring guests, the total cost should be divided by the total number of people attending, not just the number of employees.
Key Note - The £150 per head limit is an exemption, not an allowance. If the business goes over the £150 exemption, even if just by a penny, the full cost becomes taxable.
The HMRC guidance is available here.
Christmas Gifts (Trivial Benefits)
As well as the Christmas party, employers may wish to give a gift to their employees at Christmas. This gift can also be tax free provided it meets certain criteria and qualifies as a ‘Trivial Benefit’
You don’t have to pay tax on a gift for your employee, if all the following conditions are met:
- It cost you £50 or less to provide
- It isn’t cash or a voucher than can be exchanged for cash
- It isn’t a reward for their work or performance
- It isn’t in the terms of their contract.
Your usual Christmas gifts such as a wine, chocolates or even a turkey would all be acceptable as providing the cost does not exceed £50.
A high street gift voucher would also be allowable providing the voucher cannot be exchanged for cash. Most aren’t but you would still need to check the small print.
The important point to remember here is that any gift given, cannot be a reward for their work or guaranteed as part of their employment contract. It must be a genuine gift.
The HMRC guidance is available here.
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