As the festive season approaches, many employers will want to reward their staff for their efforts throughout the year.
However, depending on the gift, they could create certain tax, National Insurance and reporting obligations for themselves and additional tax costs for their employees.
To help everyone in your team enjoy the weeks ahead we’ve put together our top tips to ensure that you stay on the right side of the taxman this Christmas.
Staff parties
According to HMRC, the total cost must not exceed £150 per head and must be for your employees and any members of their family and household who attend as guests. The total needs to include VAT and other costs, such as transport and accommodation.
All staff must also be invited. If you spend more than £150 per person, the entire amount is a ‘benefit’ and must be declared on the P11D and tax will be due.
Gifts to staff
Trivial benefits are items of value given to an employee that do not count towards taxable income or National Insurance Contributions (NICs).
To qualify, the gift must meet ALL of the following conditions:
A trivial benefit in kind could include a Christmas lunch, a small Christmas present, or a gift on the day of an employee’s wedding.
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 tax must be paid as appropriate.
Incidental expenses
Incidental expenses, as described by HMRC, are expenses “incurred by an employee while travelling overnight on business”.
These may include purchasing newspapers, paying for laundry or using the hotel telephone.
As long as the value of the expenses does not exceed more than £5 per night for travel within the UK and £10 per night for travel outside the UK, they do not have to be reported to HMRC.
Link: Tax on trivial benefits
