With the festive season fast approaching, we thought a quick reminder of the tax implications of Christmas gifts and staff parties would be beneficial.
When employers provide additional benefits to their employees then they may be liable to additional tax and National Insurance on a benefit in kind.
Benefits in Kind are reportable on a P11d and an employer will pay Class1A National Insurance, while an employee will pay additional tax on the benefit.
There are certain exemptions regarding staff parties and gifts that mean there will be no benefit in kind implications.
There is a tax exemption on employee entertaining if the following conditions are met:
The cost of the party includes all costs associated with the event including food, drink, taxi’s home etc. and should be divided by the total number of guests at the party.
If the cost exceeds £150 per head, then the total cost is taxable not just the excess.
A trivial benefits exemption means you don’t have to pay tax on a benefit to your employees if all of the following conditions are met:
If you are a director of a close company you cannot receive trivial benefits totalling more than £300 in a year
Cash, cash vouchers and Christmas bonuses
These are all classed as additional earnings and must be reported as such through payroll and PAYE and National Insurance will be payable.