Festive tax tips – Christmas parties, gifts to staff and customers

As Christmas approaches we can answer your festive tax questions:

Q: What is the tax position on hosting a Christmas party for my staff?

A: The basic position 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. But spend £151 and the whole amount becomes a taxable benefit for the employee.

Q: …and can I invite customers too?

A: The good news is that everyone who attends gets a £150 allowance, including guests; this covers spouses and partners, and even customers if they are invited to what is predominantly a staff event.

Q:….and can I claim the VAT back?

Only vat on the cost which relates to your employees is recoverable. The proportion of vat relating to the spouses and customers at a Christmas party is not recoverable.  Also, do note that the £150 exemption limit includes VAT, even if you reclaim it.

Q: What can I give to staff for Christmas with no tax implications?

A: You may find the following Revenue 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 that is tax allowable?

A: Gifts to customers are only allowable as a tax deduction if:

  • The total cost of gifts to any one 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, as 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 just on the wrapping.

Merry Christmas!