Tax Savings – How HMRC can make your Christmas more magical!

Can we get The Taxman to deliver a Xmas present to YOU this year?

Discover four tax saving ideas which could make it happen!

It’s mid November already, which means Christmas is a few weeks away. For me some of the magic and excitement of Christmas as a child may have vanished but I STILL love receiving presents. The more the better. Fingers crossed Santa doesn’t forget to turn up.

As a business owner are you fully aware of all the tax implications of staff gifts and perks like the Christmas party, gifts for customers and suppliers etc. which go on each year in December?

Just by knowing and then claiming all the costs that you’re legitimately allowed could be worth a lot of money to you. You never know the tax savings may pay for Xmas!  What do I mean well read on…?

Present 1 – Staff Entertaining

You can spend up to £150 per head which can be spent throughout the year (e.g. Xmas Party) for staff and the whole amount can be offset against the profits of the business.

The whole lot is tax deductible AND, if there’s any VAT then you can reclaim that as well.

When business owners are calculating the total spend of such events they rarely forget to include the cost of the meal and drinks, BUT they often forget to include the other extra’s like any taxis to and from the venue or hotel bills. I’m sure you don’t need me to remind you that these can seriously increase the costs and as result lots of business owners miss out on valuable Tax savings.

The annual event isn’t limited to a Xmas Party. You can have as many staff events and nights outs as you like – just keep the total cost for the year to less than £150 per head.

Ps 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!

Present 2 – Gifts to customers

The cost of giving gifts to customers is tax deductible for tax AS LONG AS these 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. I know you won’t be able to reclaim any VAT or TAX Relief, BUT it’s still more tax efficient for you because the business pays for it and not you personally.

Present 3 -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 being: –

* 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. These gifts are considered to be trivial and as such are not taxable”.

Present 4 – Gifts to limited company directors (little known rule!)

Amazingly up to £300 of gifts (HMRC calls them ‘trivial gifts’) can be bought each year for any director or company secretary of a limited company.

Amazingly any family member (of a director / office holder) who is an employee (i.e. on the payroll) of the same limited company ALSO can also get £300 of trivial gifts.

So, to be clear this means that for any trivial gift you buy…

  • The whole amount is fully tax deductible.
  • Any VAT can also be reclaimed in full.

Before you whizz down to the shops there is just one rule you need to be aware of…

You must clearly record any trivial gifts in the accounting records to show that the £300 exempt amount has NOT been exceeded.

If you’ve found a tax saving or two here, then just maybe we’ve put a present from The Taxman under your tree this year!  

Happy Christmas!

If you’re reading this because it’s been forwarded to you,  or you’re reading it via a social media link.  Does your accountant give you this sort of pro active advise?  If not, why not give us a call and come and have a chat over coffee and see how we can help you to grow! Remember a second opinion costs nothing and not all accountants are the same!  Call us now on 0161 410 0020

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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 the article is correct, no liability  will be accepted by KMA Accountancy which is a trading name of Kim Marlor Associates Ltd or 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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