The next Eastbourne lunch will be on 24th January 2020, 12:00 PM – 2:00 PM, at the Grand Hotel, sponsored by Humphrey & Co – Book Here
Book onto upcoming dates here:
- 24th January 2020 – Book here
Humphrey & Co
At this time of year, it is worth revisiting the tax rules surrounding Christmas gifts and parties:-
Client Christmas gifts
- Businesses cannot claim a tax deduction for client entertaining (such as a meal or Christmas drinks for clients)
- Where clients attend your Christmas party, the costs have to be apportioned between them and employees for tax purposes
- Business gifts to clients are not normally allowed as a deduction against profits – they are treated in the same way as business entertaining.
There are exceptions:-
- Gifts of free samples of your products are 100% tax-deductible
- Gifts carrying your business advertising or branding are tax-deductible (e.g. mugs, diaries or pens), but only up to £50 per person per annum. However, gifts of food, drink, tobacco and vouchers receive no tax deduction.
- Christmas cards to clients and prospects are considered an office expense and are deductible, provided they carry a clear advertisement for the company sending them.
- VAT on client entertaining is not recoverable. You can reclaim the input VAT on gifts acquired for business purposes, which would include gifts for customers which meet the above conditions.
Staff Christmas gifts
A gift to an employee is tax-deductible provided that it is wholly and exclusively incurred for the purpose of your business. A seasonal gift is considered to pass this test. A gift made by an employer to an employee is not taxed as an employment benefit provided that it meets the criteria for being a trivial benefit. A trivial benefit is one that is non-contractual, costs £50 or less per employee, is not cash or a voucher, and is not for services performed. If the cost exceeds £50, the whole benefit is taxed, not just the excess.
HMRC have traditionally treated the following seasonal gifts as ‘trivial’ benefits:-
- A turkey
- A box of chocolates
- A bottle of ordinary wine
Staff Christmas parties
Provided the staff Christmas party meets certain rules, they are free of tax and National Insurance Contributions.
The party must be open to all employees and the cost to the employer must not exceed £150 per head (including VAT, taxis and overnight accommodation), this being the total cost of the party divided by the total number of people attending (including non-employees).
Where the cost is less than £150 per head, the unused element could be spent on another staff function (perhaps in the summer) – provided the annual aggregate spend does not exceed the £150 per head limit. If the limit is exceeded, you can choose the lower costing event as taxable.