Richard Thomson: Christmas Gifts to Staff

Richard Thomson, Accountant, Lambert Chapman LLP, EssexPosted by Richard Thomson:

Further to my recent article regarding the tax implications of providing Christmas functions for staff, another area for consideration with the upcoming festive season will be the provision of Christmas gifts or bonuses to staff.

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 will be tax free and are treated by HMRC as being a trivial benefit.

From 2016, there is no taxation on the benefit in kind if the following conditions are met:

    • The benefit in kind cost £50 or less to provide.
    • It is not cash or a cash voucher.
    • It is not provided in return for work or performance.
    • It is not in the terms of their contract.

Directors of close companies can only receive tax free trivial benefits up to £300 in a tax year. 

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

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.

December 2018

Disclaimer

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.

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