Michael Lansdell from Lansdell & Rose Chartered Accountants talks this month about claiming tax relief on staff gifts and parties at Christmas.
It’s the season where many employers want to treat their team to something festive, to celebrate and give thanks for the hard work over the year. Festivities may include a team event, be it lunch, dinner or a party, or thanks could be paid with a seasonal gift. It is important to know the tax treatment of your “treats” to ensure you maximise the tax relief available.
The views expressed in this article are specifically those of Lansdell & Rose Accountants.
Treat your team and know the tax treatment
It is good news for business owners that there are tax breaks on Christmas parties and gifts, which means you can treat your team whilst getting back some tax savings for your business.
There are rules that apply though so ensure you know the facts.
Christmas parties
If planning a festive party, understand the following tax rules before confirming that booking.
£150 per head limit
Tax relief is available for your team party, up to the value of £150 per head. This limit is strict; go over by even £1 and the entire cost becomes invalid for tax relief, not just the excess. This could work out at close to £150 extra in tax and NI – so it is important to budget!
Another key point to factor in, is that this limit is to cover all “annual parties”, so if you already threw a mid-summer picnic, or a series of celebrations through the year, the £150 per head, is the combined total.
To calculate the per head amount, simply take the total cost of each event, including accommodation, travel, food and drinks, and divide it by the number of people who attended, which should include any non-employees, such as partners or spouses.
To claim the tax relief, an actual event does need to take place. The £150 is a threshold, not an allowance that is there for the taking, regardless.
Everyone must be invited
Another rule for the tax relief to be claimed, is that the event has to be open to all employees; it can’t be a treat some but not others set-up.
Customers and patients don’t count for tax relief
Finally, on Christmas parties, note that entertaining costs relating to customers or patients, are not allowable for tax and need to be accounted for differently if they are invited to join the celebrations.
Lansdell & Rose are specialist medical and dental accountants with a key focus on tax planning for healthcare professionals.
Contact Michael today for bespoke tax advice
Staff gifts at Christmas
Seasonal and “reasonably priced” gifts are available for tax relief.
Whilst the term “reasonably priced” is somewhat ambiguous and HMRC don’t detail exact guidelines in their legislation, £50 is considered to be a reasonable amount, per person, in our experience.
Tax relief is not available on cash gifts, or vouchers where the holder can choose from a range of shops, but gifts such as festive hampers, chocolates and bottles of wine are generally allowable.
Gifts from patients
If you have provided a good service during the year, a patient may drop in a Christmas gift for you, or for the team, to which there are no tax implications to accepting it, so long as it is below the value of £250.
If tax becomes due
Of course, if you are feeling generous, you are able to host a larger, more expensive party or provide a higher-value gift – just note there will be tax due above the £150 per person annual limit.
An accountant can help you with the paperwork, as it is likely you will want to complete a PAYE Settlement Form (PSA), so your employee doesn’t have to settle the tax from a Benefit in Kind – in that case it may another unwanted “gift” this Christmas if they have to foot a tax bill!
Read more from Michael
- 5 tax savvy tips to minimise tax
- Auto-enrolment pension update
- How the new dividend rules affect you
- Buy-to-let investors face cuts in tax relief
- Maximise tax relief for CPD & Training
Dental & Medical Financial Services work alongside many other healthcare specialists to give you access to the best advice. Please call our team today to get connected.