With Christmas just around the corner, it is time to embrace the festive season, but as a business, you will want to do so without falling foul of tax rules.
Whether planning a party, treating your team to gifts, or both, here are some tips to keep your celebrations merry and within HM Revenue & Customs (HMRC) guidelines.
Christmas parties and tax relief
Hosting a Christmas party is a great way to show appreciation for your team, but did you know it could also come with tax benefits?
Here are the key points to consider:
- The £150 per head rule – HMRC allows businesses to spend up to £150 per employee per year on annual events, such as a Christmas party, without it being a taxable benefit. This amount includes VAT and covers the total cost of the event including food, drink, transport, and accommodation.
- Eligibility – To qualify, the event must be open to all employees (or all employees at a particular location). It does not need to be Christmas-themed, but it must be annual in nature.
- Stay within limits – Be careful not to exceed the £150 per head threshold, even by a small amount, as this will make the entire cost taxable, not just the excess.
Gifts and the £50 trivial benefits exemption
Christmas is also the perfect time to give a little extra to your employees.
Under HMRC’s trivial benefits exemption, you can provide gifts without creating a tax or National Insurance liability for the employee or your business.
Here is how it works:
- The gift must cost £50 or less
- It must not be cash or a cash voucher
- It must not be a reward for work
Combining the two
You can offer both a party and gifts to your team, taking advantage of both exemptions.
Just make sure the costs of the party and any gifts are recorded separately, as they fall under different rules.
A little planning goes a long way
The key to a stress-free and tax-efficient festive season is careful planning.
Keep detailed records of costs and ensure all invoices and receipts are accounted for, so you can demonstrate compliance with HMRC guidelines.
If you have any questions about Christmas expenses or want to understand how else you can make the most of available tax reliefs, speak with us today.