Mary McDonagh is a Partner and tax specialist at leading independent Chartered Accountants Kilsby Williams.
Christmas is coming, the mad dash to the shops has begun and piles of presents have started accumulating.
As well as gifts for family and friends, many of us will also be having the annual debate about what we are going to buy for our office Secret Santa present, whilst looking forward to the works party. Employees may also be hoping for some additional generosity from their employer by way of a Christmas gift, whether it is a turkey, a special malt whisky or box of chocolates.
Christmas is a time of giving and most employers do want to show generosity to their workforce at this time of year. However, unless they want to inadvertently also put a penny (or more) in the taxman’s hat, they should be mindful of the specific tax reliefs that apply to annual parties, functions, and other benefits.
Every year, the taxman effectively allows employers a £150 per head threshold for social events before they need to start worrying about tax consequences for themselves or their employees. This limit of £150 applies per head, not per employee, so a business may be generous and include partners to their Christmas celebrations without fear of giving rise to tax consequences.
However, if the choice of venue proves unpopular or there is a number of last minute no shows, the average cost can increase, creeping up over the allotted £150 per head for those that actually attend. Employers need to be aware that in this instance the taxman is within his rights to enforce an employee benefit charge, this £150 limit is not an allowance and the full cost could become taxable.
Whilst we all love receiving a festive gift, a present from the company could actually end up causing employees unwanted extra tax if the value of the gift exceeds the tax-free “trivial benefit limit” which currently stands at £50 per gift.
It should be noted however that ‘giving’ need not only be for Christmas. This £50 trivial benefit limit can apply to any perk a business wants to give to its employees, providing it is not cash, a cash voucher or a reward for an employee doing their job.
With so much negativity currently surrounding the future of UK businesses and jobs, it is wonderful that so many businesses share their success throughout the year with those who helped them get there. I would urge employers to exercise care however to make sure that it is their employees who are benefiting from their generosity and not the taxman.