Staff events and Christmas gifts – the rules you need to stick to

2021 has been another difficult year. COVID-19 doesn’t seem to be going away anytime soon and many of us are grappling with the idea that working from an office full-time might not be the way to go. And with Christmas just around the corner, many of us are also wondering whether to have an office party. You might not want to throw a big do but doing something to thank your staff for all their hard working is undeniably a nice gesture. But like everything there are various rules and regulations you have to bear in mind, so let’s take a look at what you can and can’t do.

Holding staff events

The cost of holding a staff event, whether that’s a Christmas party or something at another time of the year is an allowable tax deduction for businesses. This applies whether the event is in-person or virtual. Costs can include food, drink, tickets to events, accommodation and taxi fares. And if you are feeling really generous, this also applies to your employees’ partners.  Just remember:
  • The cost per head should not exceed £150 including VAT per person in any tax year. This means you can hold a couple of events, just as long as the cost per person doesn’t go over that amount.
  • Any events you hold should be open to all employees.
  • You can claim back VAT, but only on money spent on your employees, not their partners.
  • If the party is only for partners or directors of the business, then you won’t be able to claim back any VAT.
This allowance applies to businesses of all sizes, so even if you only have one or two employees, you can still hold an event. Just remember not to exceed the £150 per person limit as if you do the entire amount will be disallowed.

Giving your team gifts

If you want to give your staff a Christmas gift, it has to be something HMRC considers to be trivial otherwise it will be taxable. A good example of this is that  a box of chocolates would be acceptable, but a food hamper wouldn’t be. Any staff gift:
  • Must cost £50 or less
  • Can’t be cash
  • Can’t be a cash voucher as it has a cash value so would be taxable
  • Mustn’t be a reward for performance
  • Can’t be in the terms of their contract.
You can give vouchers, but it needs to be a non-cash one, such as for an experience day. And, as you’re also classed as a member of staff, remember to treat yourself as well.

Sending Christmas cards

Sending Christmas cards is a tax-deductible expense, but if you are a limited company a better option would be to donate to charity. This is because you will end up paying less Corporation Tax if you give to charity or a community amateur sports club.

Giving your clients gifts

It’s fine to give you clients a little something, but just make sure you follow these rules:
  • It must be business related, so can’t be food, drink or tobacco, unless they are samples of your products.
  • It must carry a clear ad for your business, for example branded mugs or pens.
  • It must cost less than £50 in one taxable year
  • You can’t give vouchers.
Non-promotional gifts are classed as entertaining and are not tax-deductible as an expense, and while it might be tempting to take clients out for a slap-up meal, client entertaining is never an allowable deduction for business tax purposes.

Need more help?

If you are unsure, whether your event or gift idea is tax deductible, then give us a call as we’ll be more than happy to provide you with some advice.

More Posts

Breaking even – checking the numbers

In previous newsfeeds we have described how you can calculate the level of turnover you need to create in order to meet all your costs whether they be fixed costs (rent, rates etc.,) or variable costs (goods you need to buy to convert into goods you sell).

For example, if your fixed costs are £50,000 per annum and your variable costs are 25% of your turnover, the annual turnover you need to breakeven will be £200,000. The formula is:

Annual fixed costs divided by 25 (the gross profit)

Bereavement Support Payment

The amount of Bereavement Support Payment you can claim will depend on your relationship to the person who died and when you make your claim.

Your payments will be paid into your bank, building society or credit union account.

If you were married or in a registered civil partnership with the person who died

If you were receiving Child Benefit when your partner died (or did not get it but were entitled to it), you will get the higher rate.

This is made up of:

a first payment of £3,500;

Tax codes for employees

The P9X form is used to notify employers of the tax codes to use for employees. The latest version of the form has been published and shows the tax codes to use from 6 April 2023. The form states that the basic personal allowance for the tax year starting 6 April 2023 will, as expected, be £12,570 (£12,570 in 2022-23) and this means that the tax code for emergency use will remain at 1257L.

The basic rate limit will be £37,700 (£37,700 in 2022-23) except for those defined as Scottish taxpayers

Properties not let at commercial rates

There are special rules where a property is let at less than a commercial rate or isn’t let on commercial terms. These rules also apply if a property is occupied rent free or at less than a commercial rate, for example, a property is occupied by a family member at a reduced or nil rent.

In these circumstances, HMRC can take the view that unless the landlord charges a full market rent for a property and imposes normal market lease conditions, it is unlikely that the expenses of the property are

Send Us A Message