It’s that time of year again when all over the country, office Christmas trees and decorations are being dug out from the back of the store cupboard and staff feel the need to celebrate the season by wearing silly reindeer antlers or Santa Claus hats. If you’re an employer, you may very well be be treating your staff to a Christmas party. You may even wish to give some of them a little Christmas present to show your appreciation for all their hard work during the year. In general, the Revenue take a benign view of such generosity. But only up to a point.

Staff Social Functions and Parties

HMRC advice is that staff social functions and parties are not usually subject to National Insurance and reporting obligations provided:

  • They cost no more than £150 per head
  • They’re annual, such as a Christmas party or summer barbecue
  • They’re open to all your employees

Click here for further advice from HMRC on staff social functions.

Staff Gifts

If you’re self-employed, you don’t have to report or pay tax or National Insurance on personal gifts you give to employees. If you’re a company director on the other hand, and you’re considering gifts for your staff this year, you need to ensure that those gifts are exempted from tax and do not result in a reportable employee benefit in kind. To comply with HMRC rules, a gift must satisfy the following conditions:

  • The cost of providing it must not exceed £50 per employee (or on average when gifts are made to several employees)
  • It cannot be cash or a cash voucher
  • Employees are not already entitled to a voucher as part of a contractual arrangement (including salary sacrifice)
  • It is not provided in recognition of particular services performed by the employee as part of their employment duties
  • Where the employer is a “close” company and the benefit is provided to a director, an office holder, or a member of their household or their family, exemption is capped at a total cost of £300 in a tax year.

If they don’t meet these conditions, your gifts are liable to taxation in the normal way subject to any other exemptions or allowable deductions. It’s also worth bearing in mind that if your gifts do average out at more than £50 per head, the full value of those gifts is taxable, not just the excess over £50.

Click here for further advice from HMRC on staff social functions.

For more information on tax planning, call Vallery Lee on +44 1295 812714 or +44 7767 831403 between 09:00 and 17:30 weekdays or 09:00 and 12:00 Saturday mornings. (You can also email us using the message form here.)