A guide to Christmas gifts and parties for your employee

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.

Staff Parties

There is a tax exemption on employee entertaining if the following conditions are met:

• It is an annual party or social function
• It is available for all employees (or employees based at the same location)
• The cost does not exceed £150 per head

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.

Staff Gifts

 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:

• It costs £50 or less to provide
• It isn’t cash or a cash voucher (gift cards are fine as long as they aren’t exchangeable for cash)
• It isn’t a reward for their work or performance

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.