Christmas and tax

Published by Sandra Smith on

Christmas and tax 

It’s that time of year where businesses think about rewarding their team with a Christmas gift or party to celebrate and thank employees for their hard work.

HMRC still have rules in place when it comes to tax, so we have covered the key points.

Gifts under £50

If you are a Limited company, you can provide a gift to all of your employees (and yourself) the limit is £50 and can be made once per tax year. As this is a trivial benefit exemption no Tax or NI will be due, however this does not apply to cash or vouchers so it must be a gift. These small gifts can be used a tax-deductible expense for the business.

If you decide to send a gift which is branded such as a mug, diary, pen etc (alcohol, food, drink and tobacco is not included) then you can include these as a tax-deductible item.

Gifts over £50

If you decide to spend more than £50 this will count as a taxable benefit, your employee and the business will then have to pay tax.

VAT

If you are not using the flat rate scheme, then you can reclaim the VAT on the gift. You can also reclaim VAT on Christmas parties.

Promotional gifts

If you are sending a promotional gift to a client or contact which has clear branding and advertising of your business (alcohol, food, drink and tobacco is not included) then you will be allowed to include these as tax deductible.

Christmas party

HMRC set an allowance of £150 per employee to attend a Christmas party. This allowance can also be used for a virtual Christmas party.

Christmas decorations

You can claim the full tax relief and VAT on Christmas decorations for the office.

If you would like further advice on the items that are tax deductible and eligible for VAT reclaim, please get in touch with the friendly Clear Vision Financial Management team. You can call us on 01794 330025 or email us.