Posted by admin - December 14, 2016 3:26 pm
The Gift of Giving
Here is a timely reminder on what you can claim as a business expense for tax and VAT purposes for the festive season so that this year you don’t end up on HMRC’s ‘naughty Christmas list’.
Christmas gifts to customers
Gifts to your customers should not exceed £50 and should also be business related. Examples include items such as diaries, pens and calendars. Typical seasonal gifts such as vouchers, food and alcohol are not tax deductible.
Do be aware that gifts in excess of £50 are not tax deductible and should you go over your allowance the entire amount and not just the excess is not tax deductible. VAT in these circumstances is also payable as a taxable supply.
You cannot claim tax deductions for entertaining your clients at Christmas. In the case where some clients might be invited to your Christmas staff parties then the costs of entertaining your client must also be treated differently to your annual staff allowance (see below*).
Rewarding your staff
Since 6 April 2016 the rules on small gifts for staff have changed. To avoid confusion HMRC have clarified small gifts to staff as having a value of no greater than £50 per annum (or the average cost per employee) so long as this isn’t in the form of a cash gift. Non cash vouchers up to £50 are also now allowed. Cash gifts and gifts in excess of this amount are taxable and must be declared as a benefit in kind and may have national insurance implications. Please note that in the event of staff gifts which exceed this amount then the full amount will be taxable and not just the excess!
To avoid smaller companies taking advantage of this, benefits provided to directors (or their families) have a capped exemption of £300 per tax year.
Gifts to staff from 3rd parties
These are tax exempt as long as they do not exceed £250 per annum.
Tis the Season to be ‘Merryish’ – how lavish can your staff party be?
When planning your staff Christmas party please note that the allowance is £150 per person inclusive of VAT and any staff travel and accommodation costs.
Remember, this is an annual rate and not just for Christmas so please bear this in mind if you are in the habit of throwing more than one staff party per year.
It seems that HMRC believe in the phrase “all things in moderation” so do be aware of your allowances and how best to use them. If not, your Christmas gifts will not be as impressive if they come with a tax price tag.
Should you require any further help or advice on this matter then please do not hesitate to contact your local MFW office.
Phillip Kearsey
Tax Manager
Phillip is a Fellow of the Tax Faculty of Independent Financial Accountants (IFA) and initially trained with the Inland Revenue, now HM Customs & Revenue before working for a number of top 20 Accountancy Firms. Phil joined McCabe Ford Williams in 2007 and is the Tax Manager of our Herne Bay office.
He has also had experience advising on Expat tax for individuals based in foreign countries including the United States of America, Canada, Germany and Japan. In his career, Phillip has also written numerous articles for US newspapers and in addition given lectures on the subject of UK tax.
He is currently a committee member of Kent Chartered Institute of Tax (CIOT) and also a member of HMRC’s Working Together Group and McCabe Ford Williams’ own Tax Committee.
