As we head into the festive season many businesses are rewarding staff with Christmas parties and presents.
The questions that come up every year are what are the tax implications for:
- The business
- The Directors
- The employees
The answer depends on a number of variables with the main ones being:
- Is the staff Christmas party a regular annual event?
- Is the staff Christmas party open to all employees?
Entertaining staff and their partners at a Christmas party is a tax deductible expense for a business. However, entertaining Directors only, customers or suppliers is not.
Christmas Parties – Tis’ the Season to be Jolly
Now your Christmas Party qualifies, then all costs for the event are allowable expenses. This includes travel, food and drink, entertainment and accommodation.
Staff Benefits in Kind
If the annual staff Christmas party, or combined annual events:
- Do not cost more than £150.00 gross per head
- Qualify as annual events
- Are open to all staff
then there is no taxable benefit and no need to report a staff taxable benefit on a P11d for example.
It is important that the business records the costs and attendance records to prove the qualification and reporting exemption.
If the annual cost exceeds £150.00 per head then the business must report the benefit in kind for each employee. This is usually via the completion of a P11d. The business and employee will be required to pay additional taxes.
Christmas Gifts
Cash bonuses and gift vouchers are a benefit in kind and must be reported via payroll or a P11d. It is usual practice to ‘gross up’ the value.
Christmas gifts other than cash bonuses or vouchers can be treated as trivial if the value is less than £50.00 per head. A bottle of wine and a box of chocolates for example. If the value exceeds £50.00 per head, then like cash bonuses and vouchers, the benefit will have to be declared via payroll or a P11d.
Christmas gifts are an allowable business expense, subject to qualifying criteria. More information can be found on the HMRC website. https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim45074