Christmas is drawing in on us at an ever increasing pace and at this time…
Christmas can be an expensive time, right? Wouldn’t it be great if you could get some financial help to pay for it? Well, your business can!! – and that help comes from the taxman
Here are our 3 top tips on getting the taxman to contribute to your Christmas spending.
The Christmas party
HMRC make a generous allowance of £150 per head for you to hold a Christmas party each year. The allowance is inclusive of all expenditure on the event (including VAT). You can also invite partners and if you do, they get a £150 allowance too!!
There are some considerations, in particular:
The allowance is £150 – on the nose. Go just £1 over this and the entire event becomes taxable, not just the excess. The taxable benefit becomes £151, which means that tax and national insurance must be added on top. This would make the event very expensive, either for the employer or the employee.
- You can spend the £150 on virtually anything you like, but make sure you keep the taxi fares and hotel accommodation within the £150
- The £150 also includes VAT, so be aware of including VAT in your budget
- The event must be open to all employees, not just a select few (although not all have to attend). You can also extend the invitation to partners/ spouses and they too can benefit from the £150 allowance
- You don’t have to limit yourself to just one function a year. You may decide to have two events a year at a cost of £75 each. Be aware though, if the second event costs £76, then the whole £76 becomes a taxable benefit.
- Only annual events qualify, so going to the pub on a Friday teatime is out. HMRCE have been known to pursue tax on an event which, despite it being within the limits, was to celebrate the companys 40th birthday. Whilst this is an extreme interpretation of the rules, you need to weigh up the risk against the benefit
- The HMRCE approach is to aggregate the cost of the event and divide it by the number of attendees, so there’s no need to worry that John in Marketing ordered the fillet steak! Do make sure, however, that you keep accurate records of the costs of the event, and whatever you do – Don’t forget to close the free bar in time!
How about providing your key customers or suppliers with a small gift? HMRC allow you to make tax deductible gifts to customers and suppliers, providing that:
The cost of the gift is less than £50
The gift carries an advert for your company
The gift isn’t food, drink, tobacco or vouchers that can be exchanged for cash.
Some creative thinking on what to give is required as you can’t claim for a bottle of wine!!
HMRC make no provision for you to give gifts to your employees. However, they concede that this does happen and will consider the benefit trivial, so long as the value of the item given is small.
So, you can give a turkey, box of chocolates or a bottle of wine without any repercussions. However, don’t make the gift any bigger – HMRC are unlikely to consider a hamper or bottle of expensive wine to be trivial
Finally – don’t forget your turkey is VAT free!!
Enjoy your Christmas