Merry Christmas and a Happy New Year from Tax Rebate Services

However you’re celebrating with your colleagues, family and friends, have a wonderful time. It is that time of year.

Thank you to all our marvellous clients this year. We greatly appreciate the loyalty of our regulars. And a warm welcome you newbies. Merry Christmas!

Hope you’re all prepared for the festive season at home, as well as at work.

Being full of Christmas spirit, you may have gifts under the office tree for your staff and customers. And you’ve organised the annual Christmas party, with all the trimmings.

But are they tax deductible? If you’re running your own business it’s worth thinking about.

Without wishing to sound like a pre-ghostly visitation Scrooge, it’s wise to pay attention to these details as you go along. Here’s a quick rundown to give you a hand.

Are Christmas presents tax deductible?

If you’re giving Christmas presents to clients or employees, the main thing to note is that they must have a maximum price tag of £50.00.

In order for them to be tax deductible, they usually meet the following criteria:

Conspicuously displays your business logo (like a diary or mug)
Promotional item that’s given away to the public as part of an advertising campaign
Store vouchers that can’t be exchanged for cash
Given in the spirit of the season, not as a reward for work done
It is not a salary sacrifice or other benefit included in employees’ contract

Gifts that are not tax deductible:

Alcohol
Tobacco
Food
Cash
Vouchers that can be exchanged for cash

HMRC identifies what is and is not a tax deductible by the type of gift you give to your employees. Different presents have different rules. You can check the specifics of your gifts on HMRC’s list. You do have an obligation to report some National Insurance and tax particulars. Although, if you are self employed, you do not have to pay tax or NICs on, or report, any presents you give to employees for personal reasons.

Christmas Party

Your Christmas function does not need to be reported to HMRC and you do not need to worry about tax or NICs, if it meets certain criteria:

Open to all employees
Annual event (most popular is the Christmas party)
You spend a maximum of £150 per person

There are some finer details to HMRC’s partying rules. As long as all your employees are able to get to one of them, you can have separate parties for different departments or at different physical locations. Similarly, if staff from different locations are all invited to one party that is still tax exempt.

It is possible to have more than one tax exempt event during the year as long as the total cost of them all doesn’t’ exceed £150 per person. For example, an Easter picnic, summer barbeque and a Christmas party; costing £50 per head each.

The rules are different if you have salary sacrifice arrangements in place.

Hopefully that’s saved you a bit of time looking up the rules and accounting for your festive generosity.