How to have a tax free Christmas
(15 Dec 2014)
The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.
Christmas Gifts from suppliers to employees.
Certain gifts from third parties are tax free if all these conditions are satisfied:
Some other gifts are not taxable.
If you earn at a rate of less than £8,500 a year and you are not a director, a gift to mark a personal occasion, such as a wedding present, which is not a reward of your employment, is not taxable. If you earn at a rate of £8,500 a year or more, or you are a director, any gift from your employer is taxable unless your employer is an individual and makes the gift in the course of family, domestic or personal relationships.
Seasonal gifts from Employer to Employee
An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits.
For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned. If a benefit is trivial it should not be included in a PSA (EIM21861).
If the gift extends beyond one of the items mentioned above, for example from a bottle or two to a case of wine, or from a turkey to a Christmas hamper, you will need to consider the contents and cost before being able to determine whether the benefit is trivial.
PAYE Settlement Agreement (PSA)
For practical purposes it may be that small cash and money’s worth benefits can be included in a PSA. PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.
Have a Great Christmas and New Year!