As the days get shorter, and the first Christmas trees begin to sprout on the high street, it’s unlikely to have escaped your attention that the festive season is approaching faster than Santa’s sleigh
There are only 42 sleeps to go (in case you needed reminding), and as another year draws to a close, you might well be thinking about making plans to reward your team for all their hard work, and showing your clients how much you value their loyalty. As regular as Christmas itself, it’s around now that our phones begin to jingle as we’re asked about what does and doesn’t qualify as tax deductible when it comes to staff parties and client gifts.
While HM Revenue are sometimes cast in the role of Ebenezer Scrooge, and while they may not feature high up on your own Christmas card list, they’re not completely against you indulging in some Yuletide celebrations.
Here is a brief guide to help you understand how far you can push the boat out:
Staff Christmas parties
Showing your staff how much you appreciate the work they do is key to motivating them and building a strong, loyal team. HM Revenue recognise this and give an exemption from tax, national insurance and reporting on your staff party – so long as it meets three criteria:
It must be an annual event
- It must be open to all of your employees. This can cover staff in different departments, or at different sites organising separate functions
The cost per head must not exceed £150: It should be noted that this is not an allowance. If the per head cost exceeds this figure, it has to be reported on an employee’s P11D, and may be liable to tax
Employee’s partners invited to an event are treated in the same way, but if you want to invite associates, suppliers or customers, different rules will apply
Only employers can take advantage of this opportunity – it is not applicable to sole traders
Christmas gifts for clients
HM Revenue treats business gifts in the same way they do business entertaining expenditure. As a general rule of thumb, if you choose to give business gifts to clients, you are not allowed to set them against profits to reduce tax. There are however exceptions; if a gift has a value of £50 or less, bears a ‘conspicuous’ advertisement for your business, is not food, drink or tobacco (unless this is what your business produces), and cannot be exchanged for cash – it is eligible for tax relief. This gives you the opportunity to give your clients branded promotional gifts such as calendars, clocks, mugs, mouse-mats and the like – all of which would qualify as tax deductible.
If you’d like advice on making sure your Christmas is a tax efficient one, as well as a merry one, give me a call on 01235 868888 and I’ll be happy to guide you – in exchange for a couple of mince pies and a glass of mulled wine of course!