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Staff Parties and Gifts

26th November 2020

As a “unique” 2020 ends and the festive season approaches, you may be considering Christmas parties and gifts for employees.  Here are a couple of ways to save tax on such expenditure which would normally be called as a benefit to the employee:

Annual Parties

HMRC allows an exemption where an employer hosts an annual event such as, but not limited to, Christmas Parties.

This year employers may consider holding “Virtual functions”.  If all employees are invited and provided with a hamper consisting of food and drink to be enjoyed by the attendees during the party, if the total cost per head (including delivery) is below £150 the exemption applies.

Small gifts known as “Trivial Benefits”

The employer can claim a Tax deduction and don’t need to collect Income Tax or National Insurance if you provide your employee with a gift which:

More than one trivial benefit can be provided during the year.  There is no limit to the number of Trivial Benefits given to employees, except for an annual cap of £300 on exempt trivial benefits provided to a director (or their family) of a company run by 5 or fewer shareholders.

If you provide trivial benefits as part of a salary sacrifice arrangement they won’t be exempt.

Examples of a trivial benefit include:

Examples of benefits not allowed under ‘trivial benefits’:

  • A gift voucher of £50 for a wedding
  • A few drinks on a work night out
  • A one off pizza in the office on a Friday
  • A gift of flowers on a birthday
  • A turkey at Christmas

 

  • Gifts or incentives based on targets,  results or performance
  • Taxis when employees work late
  • Working lunches for employees
  • Gift cards topped up on more than one occasion to a value greater than £50

 

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