Businesses should recover the cost of Christmas, says Watson Buckle

Businesses who have splurged on a fun night out for their employees could benefit from tax relief.

The innovative Bradford firm said that many businesses weren’t aware of the tax rules surrounding parties and gifts made at Christmas, which meant they might miss out on important savings.

Trivial benefits are items of value given to an employee that do not count towards taxable income or National Insurance Contributions (NICs).

In order to qualify the gift must not be included in the terms of the employee’s contract, it must be below £50 in value per employee, and not linked to performance or be cash or a voucher.

John Kinsella, Tax Director said: “A trivial benefit in kind could include a Christmas lunch or a small Christmas present but this isn’t just limited to the festive period, it could include any gifts made throughout the year, for example, a wedding present for a staff member who is getting married.”

John added that if the gift does not meet all of the above criteria, it must be reported as a benefit in kind to HM Revenue & Customs (HMRC) and the appropriate taxes must be paid.

“There are other allowances that businesses can use at this time of year that avoid additional liabilities, including a limited tax relief against the cost of holding an ‘annual event’ for your company, providing certain conditions are met”.

“Such events will not be classed as a benefit in kind as long as all employees are invited to the event and the cost per head includes VAT.  Owners must take in to consideration the cost of the entire event, including food, drinks, and a venue to benefit from the relief.”

“Once again, this isn’t just limited to Christmas and you may decide to hold several events throughout the year, however, the total claim for all events must not exceed the £150 threshold – even by a penny.”

John added that the tax-free gift-giving didn’t stop there, as gifts to clients could also be eligible for a tax deduction, as long as the gift is less than £50 and includes a ‘prominent’ advertisement.

“Gifts of food, drink, tobacco or vouchers are unfortunately not allowable, but items such as stationery would fall within the rules”.

If you have offered gifts to clients and staff during this festive season and would like help to treat these correctly, please visit www.watsonbuckle.co.uk