Treat your staff to tax-free gifts and parties this Christmas

Christmas is the perfect time to reward your staff for their hard work throughout the year, traditionally with a lavish Christmas party and / or personal gifts. If you want to treat your employees to a good time this festive season, here’s how you can do it tax efficiently.

Give a tax-free Christmas gift

The gifts you give to your employees won’t be subject to tax as long as they’re considered a benefit in kind which meets the following criteria:

• The benefit in kind is not cash or a cash voucher
• The employee isn’t already entitled to the benefit in question as part of a contractual obligation (such as a salary sacrifice arrangement)
• The cost of providing the benefit does not exceed £50 (including VAT)
• The benefit is not provided to recognise a particular service(s) performed as part of the employee’s role

There are lots of great gifts you can give for £50 or less – Christmas Hampers, bottles of wine, and other luxuries. Stray over the £50 mark, however, and you will be taxed on the full value of the gift. There is also no limit on the number of such gifts you can provide (as long as you stay below £50 each time). However, if you are a “close” company and the beneficiary of this gift is a director, then this annual exemption is capped at £300.

Throw a tax-free Christmas party

You can throw a tax-free staff party at any point, provided it meets the following criteria:

• It’s an annual function (like a Christmas party or summer social)
• It’s open to all employees (including guests)
• It costs under £150 per head to organise

This is an annual exemption, so you have to split it accordingly. If you want to throw a Christmas party that costs £150 per head, you won’t have anything left for your summer social. However, there is nothing to stop you using the first exemption mentioned for a party rather than a physical gift… so you could use the entire £150 per head exemption on Christmas, and still throw a summer social worth no more-than £50 per head.

Additionally, your employees can save £10 (basic rate) or £20 (higher rate) every time you give them a trivial benefit gift (officers of a close company can save up to £135 in tax).

If you want to learn more about tax efficient gifting all year round, call JW Hinks on 0121 456 0190. Our friendly and professional tax team can walk you through every element of the subject, ensuring you are not paying HMRC more than you should.