Festive Savings: Tax Deductible Expenses You Should Know About This Christmas

There are a number of tax reliefs that are available to support your annual Christmas gifting traditions. See the information below outlining different ways in which you can maximise your business gifting reliefs and have a Merry Christmas.
 

Gifts to Employees

Employers can give their employees Christmas presents up to £50 (including VAT) per employee, tax free. You can claim the VAT back on these expenses and your business can also receive tax relief on these deductible expenses. These gifts can include vouchers or hampers. Please note, if the gift value exceeds £50, even if it is by a small amount, the whole amount becomes a taxable benefit for the employee, meaning tax and NIC is due. However, any gifts which are cash or bonuses must be paid through the payroll system as any regular gross employee payment would.
 

Staff Parties 

During the festive season, HMRC allows employers to take their employees out for a party, with an annual spending limit of £150 per person. This £150 can be used throughout the year and can be spread across a number of events. To be exempt, the party must be open to all employees and be an annual event. However, it should be noted that if the total cost per employee exceeds £150, the entire amount is disallowed, not just the portion which is above the limit, these costs will then have to be reported on the employee’s P11D.
 

Gift to Clients

You can provide gifts to the value of £50 per person annually, while still qualifying for tax relief or reclaiming any VAT back, provided that these gifts include your business logo. Eligible items which typically feature a company logo include, pens, mugs, calendars or diaries.

If you are VAT registered, you are required to pay VAT to HMRC on any gifts which exceed £50 in the total value per year, for any one person.
 

Charitable Donations

Companies which make donations to any qualified charity are considered allowable expenses, this means that these are tax deductible.

Individual tax payers can make donations via Gift Aid. Under the Gift Aid, for every £1 which is donated to any registered charity, the government will add an extra 25p (“gross up”). However, this is only applicable if your donation is not more than 4 times what you have paid in tax, in that specific tax year. Once you have made you Gift Aid declaration, you can extend your basic and higher rate tax band by the gross charitable donation, therefore this increases the proportion of your income being taxed at the lower rates.

This article is for general information only. You are recommended to seek our professional advice before taking action on the basis of the contents of this article.