With Halloween now officially over, it is time to start thinking of the Christmas festivities that are fast approaching.
You may not be aware that there are actually a number of tax reliefs available for your annual generous Christmas gifting habits. See the information below for some of the ways in which you can make the most out of your business gifting reliefs and have a tax deductible Christmas.
As it is the season of goodwill, HMRC will allow you to take your employee’s out for a party.
The annual spending limit is £150 per employee. This £150 can be spent at any time of the year and it can be spread over a number of events. Please note: If you go over the £150 annual limit, then the entire amount will be disallowed (Not just the excess over £150) and it will also have to be declared on employee’s P11D’s as income.
In practice, the definition of ‘employees’ is extended to include retired members of staff and the partners of existing and past employees.
If employee’s partners attend the party, the expense will still be allowed if the total amount including guests is no more than £150 per employee in attendance. VAT can be claimed on the employee’s proportion of costs, however the VAT element on their guests’ expense must be disallowed.
Gifts to Customers and Suppliers
You can send gifts to the value of £50 (Including VAT) to any one person, per tax year. A qualifying gift must carry an advert of your business for you to be eligible to claim tax relief or any VAT back. This can include most items with your company logo embossed on it, for example pens, diaries or calendars. The advertisement should be on the gift itself, and not just on the wrapping.
Note: Expenditure of this kind is not allowable:
- Food, drink, tobacco or a token or voucher exchangeable for goods, or
- If the cost of the gift, together with the cost of any other gifts (except food, drink, tobacco or a token or voucher exchangeable for goods) to the same recipient in the same tax period, exceeds the £50 allowance.
If you are VAT registered, you must pay VAT to HMRC if you make gifts worth more than £50 per year, to any one person.
Gifts to Staff
You can give staff Christmas presents up to £50 (Including VAT) per staff member, tax free. You can claim the VAT back on this expense and your business gets tax relief on the deductible expense.
To get this tax free benefit, all of the following must apply:
- It cost you £50 or less to provide
- It isn’t cash or a cash voucher – This must be put through the payroll system as any other gross employee payment would
- It isn’t a reward for their work or performance
- it isn’t in the terms of their contract
Please note, if you go over this £50 limit by even 1p, the amount becomes a taxable benefit for the employee, and tax & NIC is due.
Individual Taxpayers: When you donate with gift aid, the government will “Gross-Up” your contributions by adding 25p to every £1 you donate to a registered charity, provided your donation is not more than 4 times what you have paid in tax, in that specific tax year. Once you have made a Gift Aid declaration, your basic and higher rate tax bands are extended by the gross charitable donation, thereby increasing the proportion of your income taxed at the lower rates.
Companies: Donations gifted by a company are an allowable expense, which means the expense is tax deductible.
This article is for general information only. You are recommended to seek professional advice before taking action on the basis of the contents of this article.