In the run up to Christmas many companies like to thank staff by inviting them to an event, or giving them a gift. It is also common to show appreciation to customers.
However, before you get too busy, we wanted to highlight the rules around staff and client entertainment and gifts…
HMRC allow up to £150 including VAT per person for staff entertainment per year. So you can offer several smaller events, or one large Christmas event, without any taxable benefit for the employee. This is tax deductible for the business.
Anything above £150 and the whole amount is taxable, so make sure you don’t exceed the allowance.
You should note that the cost of taxis/transport to the event or overnight accommodation is also included, so it can soon mount up.
VAT is also claimable on staff entertaining.
In order to qualify you must offer the event to all staff members, not just directors, or the allowance will not apply.
This is not tax deductible, nor can you claim the VAT, so the whole cost of any client entertaining will need to be borne by the company.
Small gifts of a nominal value such as a bottle of wine, a turkey or a box of chocolates is seen as reasonable, and HMRC will not seek to tax it. The amount of each individual gift should not exceed £50, and there is a annual cap of £300 per employee.
However, a cash bonus or a voucher is seen as additional salary and would be subject to PAYE and NI deductions.
Provided it is within your company policy, employees can also accept gifts from suppliers or customers, provided the value does not exceed £250.
If you give clients branded gifts, which are seen as marketing related, such as pens, mugs, hampers etc, these are tax deductible.
All other gifts – in other words, anything that does not have your branding – are not deductible.
We do hope we haven’t taken the fun out of sharing a little festive cheer in the run up to the holiday season.
If you would like some advice on allowable entertaining, or gifts, please contact us on 01256 406 601.