Chritmas save taxHave a great Christmas and at the same time save tax

 

It’s mid November already which means Christmas isn’t far away. I’m not really a party girl these days but I still love getting presents. Yet again I’m dreaming that this year is my year when I get lots of presents…and not the small pile I usually get.

The question is are you thinking of giving gifts OR having a party for your staff are you aware of the tax implications or the fact you could save tax?

The good news is that there are NEW rules relating to gifts have come in this year. It could add up to HMRC giving you another opportunity to unwrap a Christmas tax saving or two for yourself, whilst at the same time spreading a little Christmas cheer.

 

1.Gifts to directors of limited companies (NEW RULE!)

The great news is that up to £300 of gifts bought for directors of a limited company can now be treated as a trivial benefit. Anything spent under this amount will NOT be subject to tax!

Before you nip off to the shops there are three rules that you need to be aware of…

  1. You can buy as many gifts as you like throughout the year.
  2. You have to clearly record any trivial gifts in the accounting records to show that the £300 exempt amount has NOT been exceeded.
  3. All of the following people are entitled to their own £300 annual exempt amount :-
    • Director
    • Other office holder (e.g. company secretary)
    • Any family member (of a director / office holder) who is an employee (i.e. on the payroll) of the same limited company.

2.Gifts to staff

The cost of giving gifts to trivial gifts to staff is allowable for tax – so long as various criteria are met. The main two criteria are: –

* The amount spent per employee is £50 or less

* The item in question is NOT either cash / cash vouchers

To give you an idea as to what is ok then the HMRC handbook says…. “An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts are considered to be trivial and as such are not taxable”.

 

3.Gifts to customers

The cost of giving gifts to customers is also allowable for tax BUT only if the following three criteria are met: –

  1. The amount spent per customer is £50 or less

  2. The item is NOT alcohol / food / tobacco

  3. Your company name is conspicuous on the gift itself

I know many businesses still like to give out bottles of booze to customers at Christmas. If that’s you then you can put the invoice though the business as a business cost. You may not reclaim the VAT it’s still more tax efficient for the business, rather than you personally, to pay for it.

 

4.Staff Entertaining

Up to £150 per head can be spent on annual events (e.g. Christmas Party) for staff and the whole amount can be offset against the profits of the business. Don’t forget the VAT can be reclaimed as well.

In working out the total spend you need to include all costs – it’s not just the meal and drinks so make sure you don’t forget any taxis to and from the venue as well.

The event isn’t limited to a Christmas Party. You can have as many staff events and nights outs as you like – as long as the total cost is less than £150 per head.

The only other rule is that every event must be open to all employees. That doesn’t mean they all have to attend…..oh no…they just have to be invited!

 

Ps These rules are very different to those for non-staff entertaining (e.g. of customers) where the cost maybe a business expense but you can’t tax relief for it NOR reclaim the VAT.   

 

The new rules mean that you’ve got one more reason to go ahead and celebrate this festive season in style and maybe save tax!  

Happy Christmas! 

 

Disclaimer
This article is for general information only and no action should be taken, or refrained from, as a result of this information. Professional advice should be taken based on specific circumstances in each individual case. Whilst we endeavour to ensure that the information contained in this article is correct, no liability will be accepted by KMA Accountancy for damages of any kind arising from the contents of this communication, or for any action or decision taken as a result of using any such information.

 

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