Christmas is a time for giving and celebrating – but watch out for the tax implications

December is the time of year when companies hold the Christmas Party and give Christmas Gifts to staff. But to get the best value, you need to do a little tax planning.

Christmas Gifts

If you give a cash gift or a cash-voucher, HMRC will consider that a taxable earning – and the recipient will have to declare it and pay tax on it. Which takes away from the gesture a bit. That, though, won’t be the case if the gift falls under the ‘trivial’ benefits in kind rules.

The rules aren’t exact, but HMRC generally considers a Christmas Gift to be trivial and exempt from tax if:

  • It’s not cash or a cash-voucher – and
  • It costs £50 or less – and
  • It’s a goodwill gesture at Christmas and is not provided in recognition of services performed, or as part of a contractual arrangement

As a rule of thumb, anything costing more than £50 will probably not be considered trivial by HMRC.

Christmas Party

When it comes to the Christmas party, HMRC gives tax exemption of up to £150 per head. Note that this includes VAT and any transport costs – and that if the £150 is exceeded, then the whole amount becomes taxable on the employee. So if the cost is over £150, it would be better for them to pay an excess – to bring it down to the threshold.

These are just a few simple guidelines to help you get a bit more out of the festive season. We hope you enjoy it!

Christmas Greetings from all at Johnston Kennedy!

This blog post provides general information only and may not apply to your particular circumstances.

For more information, call Johnston Kennedy on +44 (0) 28 9045 6333
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