Have you sorted your employees' gifts yet? Here is how to do it tax free.
Everyone enjoys receiving presents at Christmas. However, your employees might not appreciate gifts from their employer if there is a tax charge attached. Fortunately, a statutory exemption from income tax and national insurance for employees and employers exists thanks to the trivial benefit rules.
The current form of these rules took effect from 6 April 2016, and the key conditions are:
- The cost of the gift, including VAT, does not exceed £50 per employee.
- The gift is not cash or a cash voucher – a voucher which can be exchanged for cash. A non-cash, gift voucher which can be spent in a retail store should be acceptable.
- The gift is not provided under a salary sacrifice or other arrangement.
- The gift is not provided in recognition of particular past or future services performed by the employer - a gift on the occasion of Christmas should meet this requirement.
- The watch out here is to make sure that the cost of the gift does not exceed the £50. If it does, then is classed as a benefit in kind and will need to be reported on P11D.
What if I am a director?
If you are a director, then you will still be able to receive trivial benefits, as well as providing these to family members. However, you will need to consider:
The conditions listed above, as these will all still apply.
As a director of a ‘close company’ (one with 5 or fewer shareholders), there is an annual cap of £300 in a tax year.
If you do provide trivial benefits to other family members who are not employees or directors, these will be included as part of your directors’ allowance for the year.
You do actually need to incur a cost and claim the receipted amount, so you can’t just claim the full £300 at the end of the year.
Examples of what you can do to treat yourself and your employees:
As long as it’s not cash, the gift itself could be anything, providing the cost is below £50 per head.
For example: store gift cards, flowers, chocolates, wine, hampers or even taking staff out for a meal.
These trivial benefits are in addition to the annual staff entertaining exemption of up to £150 per annum, per attendee.
What better way to increase staff morale, whilst reducing your corporation tax liability?
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