Many firms will provide a Christmas bonus to staff. Often this will be in cash which will be taxable and will normally be processed through the payroll.

However, small, low value gifts of goods to employees will normally be tax free if they fall within the trivial benefit rules. Such gifts will normally include seasonal gifts such as a turkey, a box of chocolates or a bottle of wine.

The cost of the gift will normally be a tax deductable expense for the employer.

To fall within the trivial benefit rules:

  • The benefit must cost less than £50 to provide.
  • The benefit cannot be cash or a cash voucher.
  • It isn’t within the terms of the employment contract or a reward for work.

It is noted that directors of a close company cannot receive trivial benefits worth more than £300 in a tax year.

Other Gifts

In addition to making gifts to employees, a business may also choose to make gifts to customers and business contacts.

Generally tax relief will not be available on making the gift unless:

  • It is an item containing an advert for the business.
  • It costs less than £50.
  • It does not comprise of tobacco, food, or drink.

Normally, relevant businesses will be able to reclaim the input VAT on the cost of business gifts.  However, if the gift costs in excess of £50 or is part of a series of gifts to the same person with a total cost of £50, output VAT will need to be accounted for by the business. The only exemption to this will be if the gift comprises a business sample.

The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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