The festive season looks very different for us all this year, doesn’t it? Perhaps it’s a good time to focus on the people we have near us and appreciate the little joys of Christmas; sparkling tree, outside decorations on people’s houses, good food, and gifts that show just how much that person gets you.
And then there’s the serious layer of gratitude for good health, free care if we need it, amazing professionals caring for people we can’t visit and continued income. So many people without, really makes you thankful for what you have.
Embracing the restrictions, rather than moaning about them, determines the type of Christmas you’ll have. Get a festive Christmas Radio Times and plan your viewing with your family. Get bobble hats for everyone for warm daily walks. Monopolise the extra roast potatoes! Just enjoy what you can do.
Can a virtual Christmas party still be tax deductible?
One thing we definitely can’t do is have the usual work Christmas do. But HMRC confirmed that the same Christmas party rules apply to the virtual events that many companies are holding this year instead.
The usual ITEPA 2003 s 264 party rules are:
- Annual event
- All employees are invited
- Cost is no more than £150 per head
If you stick to these rules, the expense is tax deductible.
HMRC has added an extra example, to include virtual annual events:
“A company holds one annual function in a tax year and does so virtually using IT. All employees are invited and each is provided with a hamper consisting of some food and drink to be enjoyed by the attendees during the party. The total cost per head is £100 which is within the £150 exemption and so the exemption applies.”
You can split this into more than one annual event, as long as the other eligibility criteria are met. So, you could have a virtual Christmas or New Year party and send everyone £50 hamper to enjoy during the meet-up, and then have a summer barbeque costing £100 per person next year (if rules allow).
Careful with the staff Christmas presents
If zooming in a Santa Hat isn’t for you, you might decide to indefinitely cancel your event. In this case, it’s tempting to splash out on extra Christmas presents for your employees. But do be careful, your staff can end up paying tax and you become liable for National Insurance on gifts over a certain amount.
Keep your employee Christmas presents trivial. This is an HMRC term which means under £50. So non-cash vouchers and items worth up to £50 is tax deductible. Anything over that amount is taxable and must be on employees’ P11d forms. You also need to pay Class 1 NICs on these items, through payroll.
These gifts must be motivated by the season, not a performance reward or part of your employees’ contract.
Cash and vouchers that can be exchanged for cash will be taxed as income.
What about client gifts?
You know client entertainment is not tax deductible. But you can give a tax deductible gift to your customers, as long as they meet the following criteria:
- Total annual cost is less than £50
- They are emblazoned with your logo
- Not food, drink or tobacco (unless the gift is a sample of your consumable product)
We’re here, if you need us…
Our opening hours during the 2020 Christmas and New Year period are:
December 21st, 22nd, 23rd open as normal.
December 24th Open until 1pm.
December 28th, 29th, 30th open as normal.
December 31st Open until 1pm
Wishing you and yours a warm, healthy Christmas time. See you next year!
and all the team at Tax Rebate Services.
