By Glenn Clifford-Perkins, accounting partner, Armstrong Watson
It’s the season to celebrate and give to those we value. From a business perspective, taking the time to show your appreciation for your staff can boost morale and improve employee satisfaction which will ultimately create a more positive working environment.
But what are the best ways to reward staff at this time of year?
Christmas parties
You may be looking to organise a Christmas party for staff to celebrate the festivities.
Staff entertainment – for those on your payroll and being paid salaries (but not former employees or subcontractors) – is eligible for tax relief and input VAT can be reclaimed.
This qualifies as a tax-free benefit and is therefore exempt from reporting to HMRC if it meets particular criteria.
The party or social event must be an annual event, open to all employees and cost £150 or less per person (including related travel and accommodation costs).
Summer barbecues and online or virtual parties are also exempt if the criteria above are met and for businesses with more than one location, employees can be invited to one location or separate events can be held for different sites/departments provided all employees are given the option of attending one event.
The exemption can also be split over two events as long as £150 is not exceeded in a tax year.
For example, a Christmas party costing £100 per head and a summer party costing £40 per head would also be eligible for tax relief.
If the Christmas party was £130 per head and the summer party was £40 per head, the exemption could be used against the Christmas party as this incurred higher costs. The summer party would then be treated as a taxable benefit.
In any case, it is important to record costs for all elements of the event and the number of attendees.
Christmas gifts
Rather than providing a party you might prefer to give gifts to your employees, such as a Christmas hamper or non-cash voucher.
These could be covered by the trivial benefit in kind exemption. If so, there are no tax and National Insurance liabilities for either the employer or employee.
This exemption applies for non-cash gifts costing £50 or less, that are not provided in recognition of an employee’s work or performance and have no contractual obligations.
These gifts should be awarded to staff for welfare purposes or wholly personal grounds.
For more information about tax-free benefits and the best way to reward your staff this Christmas please get in touch on 01768 222030 or email [email protected]
