As we approach Christmas here are some typical questions and answers regarding tax issues at the festive season.
Q: What is the tax position on hosting a Christmas Party for my staff?
A: The basic decision is that employers can spend up to £150 per head on annual staff events without it being treated as a taxable perk. It is also a tax allowable deduction for the company. The event must be open to all of your employees. You can spend your £150 per head however you like; on food, drink, entertainment, accommodation or travel. If however, you spend £151 or more the whole amount becomes a taxable benefit for the employee.
Q: Can I invite customers too?
A: Yes you can! Everyone who attends gets a £150 allowance which includes guests. This includes spouses and partners too and customers if they are invited to what is predominantly a staff event.
Q: Will I be able to claim the VAT back?
A: Only VAT on the cost which relates to your employees is recoverable. The proportion of VAT relating to spouses and customers at a Christmas party is not recoverable. Note, however, that the £150 exemption limit includes VAT, even if you reclaim it.
Q: What am I able to give to staff for Christmas which will have no tax implications?
A: You may find the following HMRC concession useful – “An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts are considered to be trivial and as such are not taxable.”
Q: What can I give to Customers as Christmas presents which are tax allowable?
A: Gifts to customers are only allowable as a tax deduction if:
- The total cost of gifts to any individual per annum does not exceed £50 and
- The gift bears a conspicuous advert for the business and
- The gift is not food, drink, tobacco or exchangeable vouchers.
As with Christmas parties you need to be careful because if the gift costs more than £50 (including gift wrap) the whole amount will be disallowed.
Common examples of allowable gifts are diaries, pens and mouse mats. The advertisement should be on the gift itself, and not on just the wrapping.