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:
HMRC allows an exemption where an employer hosts an annual event such as, but not limited to, Christmas Parties.
- Your annual event must be open to all employees and not exceed £150 per person, taking in to account all attendees including any non-employee guests that are allowed to attend.
- If the total annual expense per employee exceeds £150, the total cost of the event becomes a taxable benefit.
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:
- cost you £50 or less (including VAT) per employee
- is not cash or a cash voucher
- is not a reward for their work or performance
- is not in the terms of their contract
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’: