Staff Christmas Presents and the Tax Consequences

Christmas Gift

What is an Allowable Christmas Gift and Gifts in general?

As Christmas Party Season is now approaching, what constitutes as a Christmas gift? More importantly, what is an allowable Christmas Gift for Tax Deduction purposes?

Many Companies over the festive period are unsure what the tax treatment may be, whether providing staff a Christmas party or giving gifts, here we look at the outlining basics of Christmas gifts and gifts in general.

Cash Bonuses & Vouchers

Christmas presents or any gift which is received by the employee as cash will be taxable as earnings. This means it will be shown on the payslip and subject to Tax and National Insurance where applicable.

Vouchers which can be exchanged for cash will be treat the same as cash received. The employee will be taxed on the full value of the voucher.

Vouchers that can be exchanged for goods and services only (Non-Cash vouchers) are also taxable and must be reported on the Employee’s P11D. It is important to note that class 1 national insurance will normally need to be deducted through the payroll.

Gifts

Sometimes, employers may wish to give gifts to their employees for either Christmas or Birthdays etc. These are usually small in monetary value such as a bottle of wine or chocolates, as long as the gift is seen as trivial typically less than £50 per head, the gift will usually not be taxable.

If the gift value exceeds this it will need to be declared to HMRC either through P11D or through payroll.

Gifts from Third Parties

Occasionally employees may receive gifts from Third Parties as a result of their employment. Such as a bottle of Champagne as a thank you etc. As long as this gift does not exceed £250 in value it will not be taxable for the employee.

Is this cost an Allowable Business expense?

The cost of gifts provided to the employees is an allowable business expense and can be deducted from trading profits. This is the case as long as the gifts are not also provided to others and the gifts to the employees are not incidental to the provision of gifts for others. For Further information see www.gov.uk/hmrcBIM45074

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