If you haven’t already held the Christmas Party then I’m sure you will be looking forward to it, or maybe you are giving gifts to your employees this year to show you appreciation.
Christmas Parties are often seen as a good way of rewarding employees, so here are a few key tips:
If you want the party to qualify as a tax free benefit for employees you must make the party open to all employees at a particular work location, and
The whole cost of all staff parties or functions with a year must not exceed £150 per head.
Cost per head includes partners and guests so be sure to count all attendees when doing your calculations,
Remember the £150 includes cost of transport, any accommodation and VAT,
Set out the rules for behaviour before the event and ensure all attendees are aware of them. In a CIPD survey of 2000 employees “one in 10 workers know of someone from their organisation who has been disciplined or dismissed for inappropriate behaviour at the Christmas party” and, the Employer will be held responsible if you have not taken steps to prevent it.
What if the cost per head exceeds £150? The event becomes taxable and the employees pay tax on the full amount not just the excess over £150.
Note: Input VAT recovery is not restricted to £150 limit.
So, can input tax on staff entertaining expenditure be reclaimed? Yes, it can but what if partners or guests attend?
Here are 3 scenarios:
- Only staff attend; no partners or guests, then all VAT can be reclaimed
- Staff, guests and customers invited; VAT applicable to non-staff is not recoverable and VAT must be apportioned.
- Non-staff attend but pay a fair and reasonable contribution; all VAT can be reclaimed. Remember that output tax must be accounted for on the contribution.
Business gifts: Gifts are sometimes used as another way of rewarding staff and are often sent/given to customers as a goodwill gesture.
Business gifts to customers are allowable as a tax deduction if:
- The total cost of the gift to any one individual over a 12-month period does not exceed £50, and
- The gift carries a clear advert for business, and
- The gift is not food, drink, tobacco or exchangeable vouchers.
Christmas bonus for staff: Cash gifts or bonuses are treated as normal pay therefore must be subject to deductions for tax and NI. However, since 2016 it has been possible to reward employees with gift vouchers up to £50 for seasonal or personal reasons as part of the trivial benefits exemption. “Trivial benefits” – gifts for employees up to £50 value including VAT will not count towards taxable income and therefore do not have to be declared on P11D. If you have struggled to find a gift suitable for everyone then gift vouchers could be the answer.
When Christmas is over – We hope you will be looking forward to a successful 2019.
We will be holding our next HR Forum for non-HR managers and Supervisors.
SAVE THE DATE: 24th January 2019
and look out for more details immediately after the Christmas break.
When you are planning your employee training and revisions in the New Year, take a look at the on-line training modules we are offering as VideoTile partners; choose from 78 different certificated subjects that can be completed at times suitable to the employee and the employer; no travel time away from the workplace and competitive prices. For more info go to https://videotilehost.com/christinethomasltd. You can trial the first module of each course free by signing up.
If you need any advice before we meet again in the New Year, as always call 07957 882 409 or email firstname.lastname@example.org
Thank you for your support during 2018.